[Calc Review] Help me analyze this deal

[Cara Kennedy]

Hey folks,

I'm still getting used the rental property calculator here on BP. What do you think of my assumed variables on this duplex in Warren, Michigan? Any thoughts/critiques would be appreciated. Thanks! I'm eager to purchase a multi-family property by the end of this year but don't want my gut and wishes to make the numbers lie. 

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

[Patrick Menefee]

@Cara Kennedy echoing some others and adding some additional thoughts:

1. Missing insurance from calculations

2. The loan information seems off for a variety of reasons. a) as @Tchaka Owen said, no reason to do a 20 year; b) is 4% an actual pre-approval? Best I've found is 4.625% for non-owner occupied; c) closing costs seem very low. Don't forget this includes appraisal, origination fee (which you may have in 'Loan Fees'), attorney fees, escrow, prepay (insurance and taxes), etc. Personally, I've been using $6,500 and it's roughly been accurate

3. I see the down is 10% but there's no PMI - do you have a loan where PMI isn't required? If not, make sure you add that

4. Reserves look like a high estimate which isn't a bad thing. Only thing I'd caution is the property management...10% is thrown around a lot, but if you only account for the managers monthly fee and not the leasing fee (usually 50-100% of first months rent) it's going to hurt when that bill comes. Making that leasing fee annualized on a 8-10% monthly fee comes out to 12.16-14.16% budgeted

5. Is there room to grow? What is rent in the area, do you think you have the opportunity to add value and increase rent? Do you need to, or are you happy letting it ride out as is? You obviously want to get the numbers right so you truly know what you're taking in and if it's worth it, but ultimately only you can know what's acceptable for your goals and risk appetite. 

All in all it looks like it has decent potential, and if those numbers fit what you're looking for then throw in an offer! 

Only other thing I'd add...don't be afraid to make a low offer. I see you're estimating about $7,500 below ask, but it's already sat on the market for 70+ days with a couple price reductions. It doesn't hurt to make a lower offer if the numbers work better for you, and be willing to settle somewhere in the middle. I've been shocked by the offers I've had accepted.

Good luck!