[Calc Review] Help me analyze this deal

[Bryce Davis]

Looks like my offer is accepted on my first rental property. Purchasing out of SD-IRA for cash.

Property has been recently fixed up and rented.  Renter has a 1-year lease through June 2020, at $900 a month.  I'd prefer my property manager bring in a new tenant, but he seems to have a firm hand so hopefully the current tenant isn't going to cause me a real headache.

LINK DELETED BECAUSE IT HAD ADDRESS IN TITLE - Wish BP would let me delete the post and start over (sigh...).

Details: Just under 1k sq foot, current lease is $900 a month, last year's taxes were about $64 per month. Tenant pays electricity, I'm estimating $75 for water (I think that's really high) and $50 for insurance. Figuring 10% for management, and 5% each for vacancy, repairs, and CAPEX.

First year cash-on-cash return is 12.42%

Yes, I could get a better return if I borrowed money, but since this is in my IRA I'd also need to be thinking about UBIT taxes, and my IRAs and 401(k) have not averaged a steady 12.42% return every year, so I'm happy with that.

I know the CALC is not there - but am I missing anything?

[Lucas Duce]

Hey Bryce,

I think your water estimate might be a little low. Call the local city water facility and ask for the yearly average for water cost for that specific address. You mentioned that the tenant pays electricity, you didn't mention who pays for garbage. If you're stuck with that cost, you'll want to call the local waste management company and get that estimated as well.

Be careful when using past years' taxes for calculating your property tax fees. The new property tax for the property will be based off of the new purchase price and assessed value of the home. For example, I recently submitted an offer on a fourplex and the property tax for the last year was stated around $2,200 for last year in its MLS posting, but the seller purchased it 2010 right after the crash and the seller was selling it for nearly double what he paid for it. So the new property taxes would have been around $3,500 at his asking purchase price. This made the deal go from a great deal to a good deal, but in some cases can kill the cash flow completely if the numbers are barely working out. Have your realtor calculate the new property taxes based at the purchase price you and the seller agreed on. Good luck!

Sincerely, Lucas Duce