[Calc Review] Help me analyze this deal

[David Chappell]

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*This link comes directly from our calculators, based on information input by the member who posted.

Hi Everyone,

Just became a pro member and am looking through a few properties in Houston, TX. I double and triple checked this deal so I believe :) the numbers are right but let me know if I am off on anything.

- C (I think) neighborhood in NE houston. Close to nicer neighborhoods, about 10 min away from shopping/retail businesses and a small lake.
- this neighborhood is full of row houses that all look pretty much the same, this is a nicer upgraded one but surrounded by similar houses without those upgrades.\

- FINANCING STRATEGY: list price is $90k, I will be opening up a HELOC on primary residence to get the $18k for the down payment and then hopefully a traditional mortgage for the other 80%

[Cory Carlson]

The inputs are wrong if your initial post is the circumstance using $18,000 down. The analysis is assuming the $2,000 down as your "invested equity" and skewing your IRR. Being as $2000 is the denominator in the equation the analysis spits out a crazy IRR of 174.25% The visual at the bottom showing the Year 1 - 30 returns shows a year 1 equity of ~$2500. Here is an analysis with my software. I did it quick, used most of your numbers and made some minor expense suggestions, if anything it adds perspective. I am not offering you any real estate advise by using my analysis tool, I am not so familiar with the market.

These are the major inputs assumptions: 

• $90,000 purchase price and $18,000 down for 80% Loan-to-Value.
• 3.9% rate, 30 year amortization 
• Scheduled monthly rent of $1000.
• Conservative annual expense load of ~4950 (43% of Effective gross income).
• Investor effective tax rate of 15% and annual depreciation expense of $2500.

Projected Year 1 returns are as follows: 

(1) Pre-tax cashflow ~$2568 (14.27%), After-tax cashflow $2365 (13.14), After-tax return + principle pay down $3655 (20.30%) and Total Return (After-tax + pay down + appreciation-1.5%) $5005 (27.80%).