[Calc Review] Help me analyze this deal

[Cristian Gomez]

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

[Tim Herman]

@Cristian Gomez Where you getting your expense numbers. Vacancy of 1 month out of 34 months. Capex of $105 per month. Assume you just replaced your floors. You have 1500 sf of flooring. In my area it is $6 sf to replace. 1500*$6=$9000/ 8 year life span/ 12 months in a year= $94 per month. Still have to budget for appliances and hot water heater 12 year life span, hvac 20 years, painting 3 years, etc. If you increase your expenses you will have negative cash on cash. This would be a pure appreciation plat and I wouldn't want to do that this far in the real estate cycle. Since this has a HOA the exterior should be covered. I would use 8% vacancy,5% repairs, 7% capex.

[Cristian Gomez]

Thank you Tim for your quick response. This is my first property rental investment. I didn't have a basis for expenses in the washington DC area. I though that because the property is only 783 sf area it was enough percentages for capex. By any chance, do you know where (in the internet) I can get estimated replacement costs in the DC area? What about getting a home warranty for all these future replacements? The property is actually a condo. Thus, the condo fee cover the exterior: Common Area Maintenance, Insurance, Lawn Maintenance, Management, Reserve Funds, Sewer, Water, pool. 

How did you come up with vacancy of 1 month out of 34 months? In the meantime, I will increase vacancy to 8%.

Thank you.

[Russell Brazil]

I operate at 2% vacancy in the DC area, and I could easily cut that down.

[Tim Herman]

@Cristian Gomez 3% means 3 months vacant out of a 100 months. 3/100. So breaking it down further the equivalent would be 1 month vacancy out of 33 1/3 months. I rounded up. This is still a bow wow investment. You can put your cash in a money market and get 2% on your money and no tenant headaches.

[Shadonna N.]

Is this a 2BR?  Is $2100/month a realistic rent for the area.  You have to factor that in also.

[Cristian Gomez]

Tim. Thank you for clarifying the vacancy calculation.

Hi Shadonna. It is a 1BR and the $2100 rent is based on comps from the same location.