Deal Analysis / Advice and ROI Calculation Help!
I'd like to get some opinions on a deal I'm considering. Property is listed for sale at $90K. It is a 4 bed, 1 bath, 2 car detached garage, single family home in C/C+ neighborhood. Seller is willing to seller finance the property to me with $10K down payment and then 0% interest for 24 months. My payments on the seller finance note will be $1K per month, applied 100% towards principle (seller will continue to pay taxes, sewer, and garbage bills). I believe I will need to put about $10K rehab into the property in order to get it to rent for $1K per month. I will have to pay about $200 per month in operating expenses to rent it out (management fees, insurance, and maintenance).
Thus, here's the way I look at it. Initial investment is $20K (down payment and rehab). Operating expenses over 2 years will be $4800 ($200 per month). Total equity realized over 2 years will be $34K ($24K in monthly payments and $10K down payment). After two years I will cash-out refinance (assuming an ARV of $100K) and put a $75K mortgage on the property. I should be able to cash out $19K ($56K seller finance loan remaining after $10K down payment and $24K principle only payments).
For the real estate pros here, is this is a good deal? For the math gurus, how would you calculate the ROI on this deal?
Thanks!
Derek