Help me analyze this deal. I am new to using the calculator.

8 Replies

@Penny Muniak - it looks fine to me. Two modifications I'll suggest:

1. Is there a yard and if so, who maintains? If on you, I'd add maintenance....maybe $50/mo. 

2. It is highly unlikely that taxes on a $30k property run you over $2000/year. Verify taxes: that $189/mo could easily be $25/mo. That will dramatically affect your cash flow. 

Your $155/mo positive cashflow could realistically be $250-270/mo. 

Good luck!

@Tchaka Owen   not sure if she is planning to keep this property long term for rental income, but assuming she does, would you still recommend investing in small deals like this?

Despite the apparent cap rate, managing expenses on tiny deals seems super critical- A roof, HVAC or septic tank problem seems much easier to absorb on a similar sized property in a higher value/rent area.

... or am I wrong, and these are still good investments for long term holders?

Capex is low $435 a year. If you have to replace a roof you will have to have other reserves to pay for it. Vacancy is low I use 10%. Water and sewer seems low also but I don't your area. Usually it is 20 to 25% down not 5% on investment property. Rerun with new numbers and see if it still cask flows.

@Penny Muniak   Thanks for sharing!   Got lots of questions on this though.  :)  

The house is listed $44,900 so not sure how you are pulling off the $30k purchase price and only 5% down?  Also, from the pictures I see a LOT more than $1000 in repairs needed.  Your rent seems low so perhaps you are going to just rent it 'as-is' and not do any rehab but you will reap what you sow on that as far as the quality of tenant you are going to get.  

This property actually looks like it would do pretty well if you just rehabbed it and brought up the rents.  See below.  Good luck!    

@Penny Muniak

Buy for $30,000 put $1,000 in and it’s worth $50,000? Seems suspicious to me, but if course I don’t know the property. Most $30,000 houses need more work.

Lastly many banks won’t do a loan that small, so you may need to look hard. Of course if the deal is really that good I’m in :)

Originally posted by @David A. :

@Tchaka Owen  not sure if she is planning to keep this property long term for rental income, but assuming she does, would you still recommend investing in small deals like this?

Despite the apparent cap rate, managing expenses on tiny deals seems super critical- A roof, HVAC or septic tank problem seems much easier to absorb on a similar sized property in a higher value/rent area.

... or am I wrong, and these are still good investments for long term holders?

Great question! I'm retooling and part of the new me is looking at multi-units, so I wouldn't normally even consider a deal like that. However, as I listed to BP podcasts, there are guests who have and they've been successful. So I cannot knock it. 
As far as repairs go, I admit I missed that...….my assumption was that the proper rehab would be done so that there's virtually no repairs needed for a few years. Also, I'd have the tenants pay for their own utilities, so water/sewer would be $0.

This property is in Western NY, property and school taxes are based on assessed value of $50,000. School taxes are high. 

Public sewer and water not real costly. I own other property within a block so I know that cost.

They would mow the yard.

Where property is located no real fixup needed. Roof is solid. A little bit of paint and a few pieces of siding will be fine. No need to get carried away as the renters I would be renting to are hard on properties. 

Family is looking to get rid of property as Mom has passed.

Private lender allows 5% down.

Rehab wouldn't be feasible. Rent is right on in the area. I wouldn't get the money out of it if I fixed it up. Mind you I would love to but not a good idea.

@Penny Muniak

I was looking your calculation over and scratching my head wondering why your getting only 160 bucks with a 30k house and over 700 in rent .. that should do well ,then I saw your taxes. That alone would be enough for me to pass on this deal! once you get it registered often it triggers a reassessment and taxes go up . In a few years your taxes will potentially exceed your cashflow . This deal sucks because your community assessors are a bunch of communist nazis . Wouldn’t give them the pleasure of collecting 2500$ a year on a 30k house