[Calc Review] Help me analyze this deal

4 Replies

Hi Stephen - 

A few things:

1) Who will be paying water/sewer/garbage?

2) Will the tenants be responsible for lawn care, will you be managing that, or will that be hired out?

3) $4.1K in closing costs seems high for the price point. Are these estimates or are these actual figures from a lender?

1) The utilities would be the tenants responsibility. 

2) I did forget about lawn care. I would hire that out.     

3) The closing cost I found an estimate online. I also tried it will 3k for closing cost which was right above 3%. I also threw in some repair cost trying to be safe. 

I feel like sometimes I run my numbers really conservative, but I could be wrong. 

Hokay, at first glance the monthly cash flow is lower than I'd like. An 8% CAP also bores me a little, but I took a look anyway. So this is a duplex, you're listing $1200 as rent, so I assume that's both sides. I see they're both occupied, so I assume that's what your current tenants are paying.

Rentometer shows a different story, that you're on the low end on rent. Good for you for calculating conservatively, better for you if your current tenants are under paying. This potentially gives you room to grow. Depending on how you can increase the value.

This whole forum is filled with threads on the headaches of inheriting tenants that are underpaying and then trying to move them to a more profitable number. It's a pain, the last thing you want is to force a vacancy at the same time not wanting to leave money on the table.

I say this is a solid find. Lost of room for more profit. If you moved then rent up from $600 per side towards $700 per side that very quickly gets you near a 20% CAP, which is excellent.

As a matter of interest, if you take out your property management costs, and manage your self, you're at 19% CAP without raising rent. Plus you might have an easier time with your tenants rent being raised if you're the one explaining it as opposed to some stranger. Not sure if this property is close to you in proximity.

Good luck.