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Made guesstimates for the fixed and variable costs and am new to analyzing numbers. To me, the deal seems to be bad. The price is too high, but I'm unsure if my estimates are reasonable and if the overall analysis is sound.
Current tenants on a lease until summer 2020.
It isn't terrible especially depending on the area. Also if this is SFR you can have the tenant pay utilities which in your calculus would cut expenses $250 per month
@Aaron K. is right, as a SFR the tenants should be paying the utilities. Also, makes sure the lease says their responsible for lawn care and snow removal. Just be aware that this may be a sticking point since the property is so large.
That being said, @Laura Jimenez , I don't think this is a good deal.
- Your CapEx and repairs should be closer to 15% combined.
- You should expect closing costs of ~$4k.
Sure, you'll cash flow ~$1500/month, but that's only because you're paying cash. You're getting <5% CoC ROI. That's pretty terrible.
Should you finance, you'll be at ~$100/month and a miserable 1.6% ROI.
The real problem with a property like this is that anyone who can afford $3k/month rent can easily afford a $359k house, so you have an incredibly small rental pool. I say keep looking. MFR is usually a better route.
Hello, I agree to be more conservative with repairs and Capex, and would also caution you on the 5% vacancy, that seems quite aggressive. I suggest that you do more market research and get a sens of the rental market for single family rentals. Lets say worst case scenario that you go through 2-3 tenants in the first year, perhaps a temporary home for family waiting to buy, or a divorcee. You could easily be at a 70-80% vacancy rate and should therefore model your returns with more conservative assumptions so as to determine not only your base case, but also a "grey sky" and "blue sky" scenario. Could you survive if this were unrented for 5 months and and you have to replace the roof in year 5. Also, did you model brokerage fees at sale when you exit? That will be ~18-20k.
This is great that you've gotten started and have used the calculator to analyze this deal. I suggest that you analyze 10 more, inclusive of multi-families, and then 10 more... you'll start to recognize patterns and the work will pay off!
These replies are so, so helpful. I agree that I don't think this is a good deal, even though my numbers in some areas are off. That being said, I'll keep analyzing more deals to practice! Thanks for taking time out of your day to help me.