[Calc Review] Help me analyze this deal

[Elliot Friedman]

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

		Expenses			Debt service			Income
	HOA	225		Mortgage	891		1 room	600
	Garbage	20		Insurance	120		1 room	600
	Utilities	300		Taxes	134		master bed	600
	CAPEX	150					Total	1800
	repairs	100
	Assessments	50
	Vacancy	250
	Internet	50
	total	1145		total	1145
	Total monthly cost	2290
		Down payment	15000				Basement bedrooms	600
5bd 3b		Basement fix up costs	35000					600
		Totaling invested	50000
							Total income	3000
	COC	0.1704
	Monthly cash flow	710

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.

[Jaysen Medhurst]

@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.

[Elliot Friedman]

Thank you for the feedback Jaysen. I didn't fully factor basement ARV in, and the deal doesnt work as I have to sink a bunch into the basement which the next owner will not appreciate.