$487 Cashflow and 18.90% ROI. Anything missing in the analysis?

Question

This deal looks good on paper. Did I miss anything in the analysis? Want to confirm before visiting the site. Thanks.

Address: 909  6th Ave   Oroville WA 98844

NOI:              $717

Cashflow:         $487

Cash on Cash ROI: 18.90 %

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Price

Offer Price:   $69,794

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Income

Rent:          $1,172  @ 105 %

Other Income:  $0

Total:         $1,172

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Expenses

Interest:   3.88 %

Mortgage:   $230

Tax:        $45

HOA:        $0

Vacancy:    $59  @ 5 %

Insurance:  $59  @ 5 %

Utilities:  $0 (renters pay)

Repairs:    $88  @ 8 %

CapEx:      $88  @ 8 %

Property Management:  $117  @ 10 %

Total:      $685

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Total Investment

Down Payment:  $20,938  @ 30 %

Closing Cost:  $3,000

Rehab Cost:    $6,979  @ 10 %

Total:  $30,918

Theresa Harris · Answer

Do you have other utilities such as garbage and sewer?

Leon Collins · Answer

Yes, it does look good on paper. First, I figured out you loan amount is $48,856 (lead with that next time). In expenses, Repairs and CapEx at 8% should be $93.76 (total expenses are then $697.20), and the Total Investment is $30,917 (instead of $30,918). Now, just looking at RentOmeter, I would run the numbers with $1200 as the rent income, if I were you. Other than that, it really looks good. Let me know what you think Yang. By the way, did you do rent comps with Craig'slist in this area?

Yang Li · Answer

Thanks for the suggestions, guys.

Bartosz, I like how you analyze the macro factors.

Joe, what you said makes sense. I will adjust the cost estimates. I am also thinking to estimate high maintenance cost for properties which I can't attend myself and have to hire someone.

Joe P. · Answer

Interest: 3.88 % - how? This is an income property and your rate is probably going to be closer to 5%+

Vacancy: $59 @ 5 % - too low, one month of vacancy for you is $1,172. I'd start there.

Insurance: $59 @ 5 % - too low, I'd call around and get some real life quotes.

Repairs: $88 @ 8 % - too low, see below.

CapEx: $88 @ 8 % - too low, see below.

Using a percentage of rent sounds good in theory, but costs for a new roof on a 200k house are probably similar to that of a 100k house. So rent doesn't matter. I'd go ultra conservative on your costs like repairs, CAPEX, and vacancy. If it looks good THEN, then its a good deal (on paper).

My rental is a duplex that I bought for $102k and it rents for $1900 a month, sounds wonderful in theory, but I've put about $7,000 into it since buying it last August. New water heater, new stove, new fridge, numerous repairs, and a water leak emergency that I should have fixed on my own but went with a company who charged me $700 to fix something I could have done myself for basically free.

Now, I probably have a bit of a crappy house with all the things that have gone wrong with it, but I also had super conservative estimates behind my CAPEX and maintenance. So yeah, I hit worst case scenario on this particular property, but I was prepared for it.

If you aren't going to prepare for it here, I hope you have 5-10k laying around in reserves. Something is going to crash and burn on you.

David Campbell · Answer

@Yang Li thorough analysis! This indeed looks good at first glance

Bartosz Rosol · Answer

You are doing a good job with your analysis. The percentages you have outlined for capex are too vague. I would recommend finding the remaining life for the big items (roof, hvac, etc) and breaking out the cost needed to replace/repair. Do you have a cash reserve?

I don't know your area, but from a quick macro glance I've noticed a couple concerning topics. How did you come up with your rental income? No comparables can lead to high vacancies (which you may have to allocate for). The household income is under 35k, which may lead to evictions. Population has been declining. There is no job growth. Why are you choosing this area to invest?

You are doing a good job analyzing the property. I would recommend researching the macro overview of that area. Keep it up!

https://www.biggerpockets.com/blog/2015/10/13/real-estate-capex-estimate-capital-expenditures/

https://datausa.io/profile/geo/oroville-wa/

$487 Cashflow and 18.90% ROI. Anything missing in the analysis?

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