[Calc Review] Help me analyze this deal

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

Longer term goal is to buy and hold rentals.

This will be a first time investment.

Unit (1780 sq ft) needs all new carpet and paint. LP is 120 - 130k, APV = 150k 

I am looking to BRRR this with either 5% down (FHA loan) or put all cash offer (100k) and refinance (leave 20- 25% equity and pull out rest).

What would be better? 

Not getting 2% ROI in this market (DMV) but trying for at least 1.5 %.

Will I offend the seller/sellers' realtor if I put in a low ball cash offer (90k)?

Hey Everest, 

First thing that jumps out at me is you considering using an FHA loan - Keep in mind that you only qualify for an FHA loan if you actually live in the property. I'm not sure if this one is a multifamily or not, but keep that in mind. If you're going to live in it and use an FHA loan, I highly recommend you use that as an opportunity to learn how to manage your own property, so instead of putting that 10% towards a PM, I would balance out your other expenses more conservatively.

Second, I strongly recommend steering away from HOA situations. They eat into your cashflow constantly, and can turn a great deal into an okay deal, and an okay deal into a terrible one.

I would re-run the numbers and see what they would look like with just a standard 20-25% down on a Freddie or Fannie loan instead of trying to BRRRR this one. I highly doubt that putting in new carpet and repainting the unit will increase your equity in the home by 50k. If thats the only work you're doing, it also shouldn't cost 10k. If you have 100k cash to use, I would put 20 to 25k towards this property and not bother with BRRRR at all.

The annual growth assumptions don't make a whole lot of sense to me. At the very least, your expense growth (currently at 1%) should account for inflation, which depending on who you talk to, can be 2-4% or higher. In a best case scenario you would scale your income growth (by raising rents) to match or exceed your expenses. 

Overall the numbers you put into the calculator don't make a whole lot of sense to me - it kind of just seems like you made them up. Do you have more information on the actual costs of the property? Aside from painting and carpet, what actually needs to be done? How many units is it? Are you living in one of the units? 

@Ethan Grier

This unit was forwarded to me by a Seller realtor. The seller is looking for at least 120-130k. The realtor also mentioned this unit required just paint and new carpets. ARV is around 150-160k.

I will see how the numbers look at 20-25% loan.

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For a SFR, you won't be able to qualify for an FHA loan due to not living in it - You'll need at least 20% down for a Freddie/Fannie conventional loan. As far as the ARV goes, I hate to break it to you, but that realtor is trying to sell this house, they're not necessarily on your team or giving you rock solid numbers. Unless the seller is extremely motivated, and willing to sell at 15% under market value (unlikely in current markets, though it might be true for your local market), the ARV likely won't be 150k. If all that was required to create 30k of equity is new paint and new carpets, every investor on this planet would be buying houses, repainting and re-carpeting them, and then selling. Easy 30k cash.

If you're serious about buying and have the funds to prove it, consider bringing on a buyers agent. They're someone thats going to be looking out for your best interest and can provide comps as well. Let them know your intentions about scaling (buying more rentals means more commission checks for them), and they should want to make sure you're able to continue doing business with them.