[Calc Review] Help me analyze this deal UPDATE

6 Replies

@Adina McCollough with you paying all cash you won't have PMI. Your cash on cash will be higher. When you are starting out it is better to use leverage providing you can find a loan with a decent % for such a small loan. Using my handy calculator your cash on cash would be >32%.

Okay Tim, 

I actually know there shouldn't be PMI considering there's no mortgage on the deal but for some reason I threw it in there anyway.

What I'm not familiar with is cash on cash. Because the purchase price is so small I didn't think a loan would be the best option. What would be a good target cash on cash return?

I updated the numbers...
https://www.biggerpockets.com/buy_and_hold_results/1356809.pdf?c=1575831139

Insurance seems high. Did someone quote you that? Aren't the property taxes in Chicago super high? That's only $2800 a year. I expected more like NJ/NY numbers.

@Adina McCollough don't forget to tag. Cash on cash is the amount you receive after all expenses divided by total cash invested. You can't see the the updated numbers. Ill use the old numbers you are cash flowing $639.17*12=$7970.04/59000 total cash invested = 13% return on cash. I used 5% 30 year amortization 20% down. Plugging those numbers in you get a payment of $236.20. $639.17-236.20= 402.97*12=4835.64 Your total cash investment is 11k down+2k closing cost+2K repairs or 15k total cash. $4835.64/$15000=32.23% return on cash. If you did this on 3 additional properties ie total of 60K invested your income would be $19342.56. See what the power of leverage does for you. 

@Frank Geiger those are the taxes for 2017 and they can be appealed, those are a little high. Property taxes in Chicago are fairly low, the south suburbs is where you will pay $6k+. The insurance is an estimate, not a quote. 

@Tim Herman indeed, thank you for breaking that down. 

Thank you both for your feedback. 

The property was recently rehabbed so there isn't much that needs to be completed everything in the property is brand new. 

Originally posted by @Frank Geiger :

Insurance seems high. Did someone quote you that? Aren't the property taxes in Chicago super high? That's only $2800 a year. I expected more like NJ/NY numbers.

City of Chicago taxes are quite low for the region relative to property price and Cook in general is usually reasonable. Often less than 2%. North (Lake County) and South suburbs the taxes can get crazy relative to price. It is very common to see 4-8% of price and I have seen 15% recently in Park Forest. And in Chicago, it seems much easier to appeal them down. In south suburbs, everyone's taxes are outrageous so there are often no "comps" for appeal to lower them.

Take everything you read about Chicago with a grain of salt. For some reason, we seem to be the subject of a lot of misleading headlines.