[Calc Review] Help me analyze this deal

1 Reply

Hey Bryan!  A few questions about the report:

-Your cash-on-cash return of 240% should give you pause. A typical attractive COC% would be around 12%. A great % would be around 14-15%. This implies something is up with the estimates you've provided.

-How are you calculating the $1,000 closing costs off a purchase price of $168,000?  That seems low, and I'm wondering if that was quoted to you from someone of if it's an estimate.

-Where does your income estimate of $1,625 come from?  It's hard for us outsiders to gauge whether that's accurate without more property info (type of property, number of units, number of rooms per unit, zip code, house hacking vs renting on Craigslist vs renting to corporate travelers, etc.).

-Speaking of the purchase price, is this the listed price of the property, or is this the target price you're aiming to pay?  That will go a long way toward determining how realistic this report is, since there isn't much property information included (address, location, etc.).

-Estimated repair costs are $0.00.  Even with a "move-in ready" property, there are usually a few minor things to update (even if it's just light switches and new paint for the accent walls).  I do see in the property description that it has been "renovated top-to-bottom", and that does sound promising, but relying on seller stipulations can be a bit risky.  Consider adding some padding here just to be safe.

-I'm curious to hear how you arranged no down payment for this loan at a 3.6% interest rate, since these terms are shockingly generous.  Do you have a private lender who you've worked with before?  I don't see any private mortgage insurance included in your expense calculations, and most conventional lenders would require this with a down payment of less than 20%.  Just want to make sure you've thought of this.

-Speaking of expenses, I see a CapEx and Repairs budgets of 3%. This seems low as well. Again, I know that the property has been "renovated top-to-bottom", but unless you were the one performing the renovations, it might be prudent to assume the previous owners left out a few things. I'd be curious to hear when the property was built, when the roof was last replaced, what the current condition of the foundation is, and whether the electrical / HVAC / plumbing infrastructure is in good shape. If not, you may be looking at a deferred maintenance situation, which means you'll need to bump up those CapEx/Repairs budgets to something like 8-10%.

-You appear to be assuming an annual property value growth rate of 5%.  That's pretty ambitious.  Most estimates I've seen are in the neighborhood of 1-2%.  That reminds me- what kind of investment play is this?  Are you going to buy-and-hold and use this as an income property, or will you fix-and-flip?  Or something else?

Hope this helps.  Keep in mind I'm still looking for my first investment property, so take what I say with a grain of salt. :-)

Best of luck!