[Calc Review] Help me analyze this deal

2 Replies

I am looking at a property that currently has three bedrooms, two bathrooms and an unfinished basement. If i finish up the basement i can make it two bedrooms and two bathrooms and rent each bedroom out individually. Based on the local market, i believe that i can rent the rooms for $600 a piece. 

5rooms*$600 = $3,000/month

Expenses

ExpensesDebt serviceIncome
HOA225Mortgage8911 room600
Garbage20Insurance1201 room600
Utilities300Taxes134master bed600
CAPEX150Total1800
repairs100
Assessments50
Vacancy250
Internet50
total1145total1145
Total monthly cost2290
Down payment15000Basement bedrooms600
5bd 3bBasement fix up costs35000600
Totaling invested50000
Total income3000
COC0.1704
Monthly cash flow710


Please let me know if this makes any sense. If i were to rent out the house on its own, I would maybe get fifteen hundred dollars a month.


I am a new real estate investor and it was my realtors idea to finish the basement off. The deal only makes sense if i can finish off the basement for a very reasonable price and i can get the rents i think i can get.

@Elliot Friedman , making the basement livable space isn't as easy as just throwing up some walls. There are code requirements (like egress and glass ratios) and practical considerations (like the feasibility of adding plumbing below grade). I'd be darn clear on what will actually be required and the total cost. 

I think you're unlikely to get the same rent for a basement bedroom as you would with one on the first floor.

I don't see an ARV listed in your numbers. Adding the basement might make your rental numbers work, but you may end up spending $165k on a house that's only worth $150k, which isn't good...

Lastly, looks like you plan on getting a mortgage with ~10% down. If so, the bank will want this to be your primary residence. You should expect to live there for at least 1 year.