[Calc Review] Help me analyze this deal

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Updated almost 3 years ago

We’re looking for our first deal. We found this 4-plex in an area which could potentially see tremendous growth in the next few years. What do you all think?

Howdy @Carl R.

I would not do this deal. It does not meet my investment criteria. CCR 6.05% is way to low. I want a minimum of 12%. The Cash Flow is too low. $258.38 ($64.60 per unit) using the 50% Rule does not meet my minimum of $100 per unit.

Whoa, yeah, yuck. That's a lot of money out and only pennies in profit. I agree with the above, Cash on Cash and CAP need to be at least double, if not triple.

Thanks for posting though, you should probably look at this one a little closer before proceeding.

@Carl R.

CCR is short for Cash on Cash Return on Investment. It is one of the 8 bold titles on the top of your report. You calculate it like this: CCR = Annual Cash Flow / Initial Cash Invested. From your report it would be $4,360.56 ($363.38 x 12) / $72,100 ($59,600 Down payment + $2,500 Closing cost + $10,000 Rehab) = 0.06047 or 6.05%.

I am new also, but I think it depends on what your goals are...  My goal for my first deal is not to hit a home-run; it's to get on base.  

I feel like getting into your first deal so you can learn from your own mistakes and grow as an investor, is probably more important than hitting a specific CCR or $/Door goal... Those goals are important, and you shouldn't put yourself into a BAD deal, just to get into a deal - but - I feel very much like I'd rather get in with relatively poor CCR, just so I can start the train moving down the tracks.  

I think the main question I have for you to figure out is this: What would you need to do to increase your rents above your estimated $3,000?  Simply by increasing rents by $50/door, you would increase your CCR to 9.4%, AND meet the $100/door minimum most investors look for!

Anyway, I hope you don't get discouraged by not meeting lofty goals on your first deal.  Getting into the game is more important than only swinging if you can knock it out of the park.

Good Luck!!