[Calc Review] Help me analyze this deal

7 Replies

If your repair estimates and time to sell are as you say then this looks like a great deal. I put the numbers in my personal calculator and came up with the exact same numbers. The only thing I put in my analysis is 3% for unexpected expenses. At 3%, you would lose $7,500. In addition to your expenses to sell the property you have to factor termite inspections, repairs, concessions and discounts you are asked for after the Offer To Purchase is accepted. Unfortunately, these calculations are not on the BP calculator. i came up with $50,900 after taking out the $7500. Still a terrific deal.

I would probably buy and hold this property. Finance the entire deal. $126,000 + Repairs + Closing Costs = $169,000. Finance with $40,000 down. Rent for $1500+ per month and you make 205% ROI with an annual cash flow of $4,947. This gives you average ROI of 46% for the first 5 years. Then you make even more money when you factor depreciation and appreciation. I don't like to give up the $5,000 annual income when I am not positive that I will find many more properties. It is always great to have some properties you hold for cash flow and then use that money for buying other properties.

"Don't Sell Your Cash Cows!"

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If you can pay the $169,000 with no financing then your cash flow is $14,259.00 per year and I prefer to get this type of cash flow with 5 or 6 properties and then I can use the money to live on Easy Street or to invest in other properties. This money is a nice cushion to have for unexpected expenses. In 2008, when the bubble popped I had a lot of cash saved up from holding properties and I paid cash for 24 houses in Las Vegas. Guess who I purchase many of my properties from. It was the investors who were sinking all their money into flipping houses. They paid prices that were too high and did not have a reserve of cash to finish their rehabs and rent and hold the properties.

OK, help me understand. I'm a newbie, but when you finance a house and put $40k down, and get back around $5K per year, how is that a good deal, if you have $40k tied up for 10 years in a property? Are you refinancing once the rehab is done, and getting your $40K back out? Just curious and trying to learn.

it is all in the last chart that was posted. During the first 6 years you are averaging an ROI of 45% on your money since you purchased the property for a discounted price. Your average return is 19% over a 30 year period when you factor rent increases. Then you have to do the math the depreciation, appreciation, and your tenants payments toward the loan principal. Personally, I don't bother with this math because I will have already decided whether or not the deal is good with my more-simple math. Most investors don't net more than 8% to 10% with single family properties. The gold is in multi-units.