[Calc Review] Help me analyze this deal in Michigan repost

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Cristian Pap
Gilbert, AZ · Member since 2017 · 5 posts · 2 votes
7y

@Erin O'Connor Smith

Is this property in the Detroit Metro Area? I'm in the middle of closing on a SFR in one of the suburbs of Detroit and the true closing cost, taxes and interest rates in my case are a little higher. Insurance might be a little higher and the water and sewer I would at least match with what they say they spend currently. If you want you are more than welcome to message me and I can email you my break down.

Everything else looks good if the rents are truly what they say they are.

Good luck.

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  • Cristian Pap
    Gilbert, AZ · Member since 2017 · 5 posts · 2 votes
    7y

    @Erin O'Connor Smith

    Is this property in the Detroit Metro Area? I'm in the middle of closing on a SFR in one of the suburbs of Detroit and the true closing cost, taxes and interest rates in my case are a little higher. Insurance might be a little higher and the water and sewer I would at least match with what they say they spend currently. If you want you are more than welcome to message me and I can email you my break down.

    Everything else looks good if the rents are truly what they say they are.

    Good luck.

    1Reply
  • Wendy PattonBusiness Member
    Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes
    7y

    What are the details? I would love to hear about it. 

    Michigan Real Estate Investors539 Reviews
    WebsiteView Page
    0Reply
  • Jaysen Medhurst
    Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
    7y

    @Erin O'Connor Smith, you don't have gas in your analysis. The listing specifically says that heat and hot water are paid for by the owner. That will easily kill your cash flow. One approach is to convert all the units to electric heat. I'm a big fan of mini-splits. They have the bonus of adding A/C in the Summer, which is a competitive advantage and should command higher rents. The flip side is that you have to make sure the units are well buttoned up. Very little air leakage, and ideally, well insulated. This means some additional up front costs.

    Closing costs will probably be twice what you have here.

    What's the deal with the basement? Can it be made into a legal 5th apartment? At what cost? If so, you *may* have a real value-add opportunity. By adding a 5th unit, you're now commercial. You can buy it based on residential valuation, but then get a commercial valuation (based on NOI/ Cap Rate) with the 5th unit. You could add $50k of value, pretty easily.

    0Reply
  • Erin O'Connor Smith
    OP
    Los Angeles, CA · Member since 2017 · 75 posts · 24 votes
    7y

    @Jaysen Medhurst Wow, these are really good points. I had completely missed the gas at $1400 per year. Mini-splits are interesting for sure, especially with just one per unit needed I'd imagine with 500sf per apartment. And the basement, I'll need to check what is possible with that but what a super idea... Thank you!

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  • Cristian Pap
    Gilbert, AZ · Member since 2017 · 5 posts · 2 votes
    7y
    Originally posted by @Wendy Patton:

    What are the details? I would love to hear about it.

    In a nutshell.

    Purchase Price 90,000

    Interest Rate 5.5%

    Down payment 20% 18,000

    Closing Cost 7,446 (includes prepaid taxes, insurance for 1 year, appraisal, loan fees)

    Inspection 600 (includes home inspection, camera scoping and cleaning the sewer line)

    Property Management fee 1100

    Rent Cert 250

    Misc repairs 1000

    Total Invested 28,396

    Projected rent 1100/month

    Projected cash flow 188.19/month for a 7.95% CoC RoI (this is after all expenses like PM fees, Insurance, Taxes, mortgage and vacancy, maintenance, Cap Ex at 5% for each)

    I know it's not a home run but for my first property to get into and prove to the people I work with that I'm serious about investing I am OK with the outcome.

    0Reply
  • Wendy PattonBusiness Member
    Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes
    7y

    @Cristian Pap yeah not a home run but if you have the cash and you want to buy it - then go for it. Also i know of a guy who has some great mortgage programs with 20% down no doc loans for those who are self employed - as long as the PITI is covered by the rent they will fund it.

    Michigan Real Estate Investors539 Reviews
    WebsiteView Page
    0Reply
  • Cristian Pap
    Gilbert, AZ · Member since 2017 · 5 posts · 2 votes
    7y
    Originally posted by @Wendy Patton:

    @Cristian Pap yeah not a home run but if you have the cash and you want to buy it - then go for it. Also i know of a guy who has some great mortgage programs with 20% down no doc loans for those who are self employed - as long as the PITI is covered by the rent they will fund it.

    I will consider that on my next deal and reach out when time comes. Thank you  

    1Reply
  • Wendy PattonBusiness Member
    Real Estate Consultant · Clarkston, MI · Member since 2009 · 864 posts · 350 votes
    7y

    @Cristian Pap my son lives in the Phoenix area - we are going out there soon for a visit.  We hope to buy a winter home there one day in the near future.

    Michigan Real Estate Investors539 Reviews
    WebsiteView Page
    0Reply
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