[Calc Review] Help me analyze this deal

6 Replies

depends on your goals with the property. if you intend to hold for equity then even with the 50% rule at -$122/ month isn't bad in my mind (acquiring a 450k property for 122/month) but if cash flow is your intention it doesn't look great. if initial repairs cover the big things that can go wrong (roof/foundation/hvac) then you shouldn't have much cap ex in the next few years. hope my two cents helps. 

@Bobby Hermosillo , why do you think you'll be able to add $135k or value with only $20k of work? What are the local comps? The place looks pretty good in the pictures, why would it sell so far below asking and yet be worth so much more?

Since this is a low down payment loan, you'll have to owner occupy. Run the numbers both with you living there and after you move out.

Beyond those initial questions, your expenses are wildly unrealistic.

  • Vacancy is typically 5-8%.
  • CapEx and Repairs ~15% combined.
  • Insurance will be 2-3X this for a $450k property.
  • You haven't accounted for management (10%). Always include, even if you plan to self-manage at first.
  • Water/sewer might be a little low. Call the local water authority and get last year's bills.
  • What's the $100 electric bill cover? I wouldn't expect a house meter on a duplex.

When I run some very rough numbers, this is at least $150/month in the red as a pure investment property. See what the numbers look like owner occupied. Might be worth doing as a short-term house hack to lower your living expenses, build equity, and get experience as a land lord. As a pure investment property, this is probably a pass.

@Jaysen Medhurst

Thank you for your response, this is why I posted in the forums, to seek advice and help. To answer some of your questions, I ran comps for the property and based on the comps, this property could be listed between $405k-$415k and with some minor cosmetic upgrades, paint, counters and finishing the other side basement, that is where I came up with the value add and increased ARV. As for the vacancy, this part of Colorado had a 1.20% vacancy rate in 2016, 0% in 2018 and is trending the same in 2019, but it makes sense that I should be more conservative in my analysis. Thanks again for the help.

Your vacancy, Repairs, Cap ex are too low.  Insurance also seems way too cheap.  I'm paying over 1200 a year on insurance here. I don't see Property management in your equation. 10% is pretty average. It's always better to be a little above than too low.  That's how I lost my first house to foreclosure.  After you up those percentages you are probably closer to 250 per month cash flow.  Which is still decent. 

It doesn't matter what the national rate is for vacancy.  Everyone has them and there is no guarantee you will fill them immediately.

Some things to keep in mind.  Age of: roof, water heater, furnace, AC, driveway, plumbing, appliances, flooring, cabinets, pain.  Those can definitely cost you some money.  Unless this house is in mint condition and all those items were replaced you will probably want to up your repairs and Cap Ex to at least 5%.  Tenants can and will wear things like flooring, appliances, and cabinets, etc.

Appreciation is kinda tricky and really varies by market.  I normally don't ever bank on that.  That all depends what your long term goals are with this property.  If you choose to buy and hold or to flip it.