[Calc Review] Help me analyze this deal

26 Replies

But with a $1000/month rental, and an $850 P&I, you’re going to be cash negative if you factor in your need to save for cap ex, maintenance, vacancy, and PM (usually 8-12%) of monthly rent.

@Roberto Lopez Based on the report, a few things are not properly set up. A few comments:

1. Your overall rent expectation is low compared to your purchase price (see the 2% / 1% rule)

2. your monthly expenses are through the roof. If you look at the breakdown, you can see that you put your annual property taxes as a monthly expense, so you should change that. 

3. Estimates for Vacancy, capex, Management, Repairs at 2% are way too low. Property management usually costs between 7%-10%. Capex is usually set around 8-10% (check BP's blog, they have multiple articles about that). Vacancy at 2% means your property is empty only one week a year, that might be a stretch too.

4. How did you come up with an ARV of $250k for a house purchased for $190k with only $5k of repair work? Unless you're making a very good deal at purchase, it's unlikely that your property would appreciate so much post acquisition.

Please let me know if I can help!

@Roberto Lopez

Doesn’t seem like a good deal at all.

P&I, taxes, and insurance aren’t even covered by rent. Take in to consideration PM, repairs, Cap and you are paying out of pocket every month for someone else to live there.

I would look in to the 2%/1% rule.

@Roberto Lopez

Ok, as I look at this I am thinking, "Hopefully this person is looking at the property with their own eyeballs." Please remember, any deal has to make sense when you buy it, first. Realtors write descriptions to get houses to sell, that doesn't mean it is a good deal based on your circumstances. In my opinion, based on basic numbers displayed it's not a good deal unless you start cash flowing on 13th month. In my market, that can be hard bit still doable (but I usually consider the 1st year a bust). I don't fuss with all the fancy calculations, I look at it from debt-service-coverage with ratio. I had once heard 1.4 was good. So when I look at a property, I look at it with how much it should rent for based on my PITI+PMI. Everything else is fluff that makes me feel better/worse. I noticed in this case that will use a down of 3.5%, so you're house-hacking. Did I miss PMI? That will also add considerably to closing costs. Something you might want to review is Fannie Mae Eligibility Matrix, very helpful. Now if you're buying with 20% down and then rehabbing to increase rent-flow to say $1,500, then it might be good. That's another thing, it's a rental, if it generates $900 in rent now, why would you spend more than $1,200 in rehab if it only is going to rent for $1,000? Remember this is a business, you can't stay afloat without having positive cash flow.

@Roberto Lopez

$190k purchase price and rent is $1000?! Not trying to be rude, but I think you need some more education before looking into REI.

hi, matt I thank you for your comment that's why I'm talking to all of you guys because this is another way to educate myself. You all masters in this and I'm a newbie even if I'm 52 I feel like a baby learning to walk.

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