[Calc Review] Help me analyze this deal

4 Replies

@Steven Lewis There are a couple concerning things with this one...the numbers aren't good across the board, but that's all relative. The predicted value on its face is $590,000, but I can look more into this...public records list this as a SFR, but the listing is a 3-unit...I'm assuming this is a conversion...but that may not matter. The price trends look good in your area...and it looks like it just transferred in August of this year?...

Quite frankly, the only thing that the numbers do with residential property is make us feel smart...ARV is you only metric that matters. period. What is the intended use for the property?

@Brandon Sturgill Thanks for your reply. This is my first report and just paid to be a pro member, so I apologize if did the report incorrectly. 

Purchase price $425,000 all cash.

I would keep the property as is with the 3 tenants in place, generating $3800 in gross rental income. 

I didn't know what to put in the "Expense increase" and "Income Increase" and "Property Value Increase" so I just did small numbers. 3%, 1%, 1%  

The property would need approx $100,000 in renovation, that I would not do yet.

I am selling properties similar to this around $650,000.0

I intend to just hold on to this property for the rental income. 

@Steven Lewis No worries. The in-place rents for the cash outlay are pretty low, but that's all relative...the repairs seem excessive...assuming an ARV of $650k and cash out at 70% LTV lands all of your cash back in hand if you do not do the reno...use delayed financing.

$525k all in with ARV of $650k changes things quite a bit...you can't pull all your cash back out, but getting $350k back may work...

What is your possible appraised value as-is? 

With the property in its current condition, the appraised value is probably around $500k. 

I just did the home inspection and the property needs about $100k, which was what I expected. 

This city is rent controlled. However, the benefit I have right now is the fact that the rents are not yet registered with the town.
So keeping the tenants as is with the low rents will set me up for low rent registration.

Instead, I would rather get them all out, do the necessary renovation, including separating the boilers, this way each tenant pays their own heat and hot water. Then I can list each unit for top dollar and register the new rents at top dollar.

So I have 2 options:
Delayed financing at $425k pulling 70% out (within 3 months of purchasing). $297,000. Then apply $100k back to renovation. Leaving me with $197,000 liquid to put back into my account for something else. 
Or do the renovation putting $100k into it, all in of $525k after renovation, then cash out refi at the ARV (hopefully $650k). Thus getting $455,000 back liquid. Going this route would hit me with a higher interest rate though.  

Thoughts?


Originally posted by @Brandon Sturgill :

@Steven Lewis No worries. The in-place rents for the cash outlay are pretty low, but that's all relative...the repairs seem excessive...assuming an ARV of $650k and cash out at 70% LTV lands all of your cash back in hand if you do not do the reno...use delayed financing.

$525k all in with ARV of $650k changes things quite a bit...you can't pull all your cash back out, but getting $350k back may work...

What is your possible appraised value as-is?