[Calc Review] Help me analyze this deal

4 Replies

@Diego Lopez

I need more backstory to this. Are you not going to refi when your finished to get your money back out? 

Cap Ex is very high at 10%. I would place it around 4-5.

Repairs are insanely low at 2%. Should be closer to 10.

Originally posted by @Heath Ryans :

@Diego Lopez

I need more backstory to this. Are you not going to refi when your finished to get your money back out? 

Cap Ex is very high at 10%. I would place it around 4-5.

Repairs are insanely low at 2%. Should be closer to 10.

I wasn't planning to Brrrr this property. This is currently a SFH (was one a duplex) that we were planning to reconvert into a duplex (all we literally need to do is put a wall where french doors were installed). It's in a nice location, right by a lake and will be walking distance from a project that will revitalize the area. The numbers in the report are based on what it would cash flow after we move out. Rents can't be increased much more than what i've put in. Also, It will need about 10k in cosmetic repairs (reason why repairs are low) in order to get the rent that I'm looking for as well as gas and water will need to be separated in order to decrease expenses.

@Diego Lopez alright. Gotcha. 

With the repairs, no matter how much you fix it up, things will still break, there will still be turnover between tenants, things will still wear down. You want to account for that as it happens. 

Cap ex i still think is high. But if you prefer to budget that much for it, thats fine. 

You didnt include property management expenses of 10%. Make sure you have that for when the day comes. 

I dont see this one cash flowing after those adjustments. I think it will probably be negative. 

Howdy @Diego Lopez

Overall I think your total reserves Vacancy, CapEx, Repairs) are a little high but still ok. I usually maintain around 20%. I start off with 10% for CapEx until I have the property inspected to determine the current condition and life expectancy of all major components and appliances. I adjust the amount after I decide what will be included in the Rehab and what will be deferred.

I agree with @Heath Ryans on 2 points.  Do not adjust your expenses to make a property cash flow better. They will occur whether you pencil them in or not.  Just because you budget for $$ in Repairs doesn’t mean that much will be spent.  Also you should always include PM in your analysis even if you plan to self manage.  First I’m a firm believer that your time is worth something.  Secondly, you may want to expand your portfolio and decide down the road to use a PM Service.  If you did not include it in your original analysis how do you expect to add it later.