[Calc Review] Help me analyze this deal

3 Replies

Hello BP family,

Just joined and need help to analyze this deal. This will be our second investment property so we are basically newbies. Our goal for this property is to own for 20 or so years then sell to fund my daughters college. We would like refinance in year or two so we can get our capital out but have a couple questions for you guys. From the 6 or so quotes I got from small banks and credit unions it seems like higher the closing costs, lower the interest rate. I think this is because of an "investor fee" that the credit union passes on to the borrower from Freddie and Fannie. The small town bank does in house mortgages The interest rate is 1% higher but way lower closing costs and will do 75% LTV where the Credit Unions only do 70% LTV.

Credit Union -REFI

Loan Amount$59,500.00
Closing Cost$6,000.00
Amortized Over30 years
Loan Interest Rate4.376%
Monthly P&I$297.11
Total Cash Invested$8,368.36

Cash flow - $161.57 30.45% Cash on Cash ROI

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Small Bank - REFI

Loan Amount$63,000.00
Closing Costs$3,000.00
Amortized Over30 years
Loan Interest Rate5.850%
Monthly P&I$371.66
Total Cash Invested268.36

Cash Flow - $67.92 . Cash on Cash ROI 303%

So is it better to have an almost free property vs one with better cash flow?  Thoughts?

Thanks 

Joe

View report

*This link comes directly from our calculators, based on information input by the member who posted.

@Joe Michaels , you break even with loan #1 after ~7 years, even with the lower LTV. So, if you plan to hold for 20, that's definitely the better way to go.

How confident are you in the ARV? You're only putting in $3k of work. How are you realizing $27k of additional value?

Regarding your expenses:

  1. CapEx and Repairs are a little low. 7.5% each is what I use.
  2. Vacancy might be a tad low, but that's very local.
  3. Water/sewer looks very high. I usually estimate $30/unit/month.

@Jaysen Medhurst , thank you for the reply!  

I agree. I think loan #1 is a better deal long term. 

Not very confident in the ARV however I am hoping to get the property for 20% under market as the seller appears to be highly motivated. . I guess Im banking on the initial purchase appraisal to be much higher then what we are paying.
 Not much to update for the interior but the exterior is a complete mess as far as curb appeal goes.  Stain/Fix the deck, landscaping, put a nice Faux stone front porch.  

Property is coming with 2 long term tenants (hopefully)    Water/Sewer I estimated from my other rental which are 2 bedroom so the water may be a bit high.