Please help me understand these listings and returns
Hello All,
I am going through BP marketplace and came across some listings. I would like to post my analysis on these deals here for your feedback. I hope it is allowed on the forums. Mods, please feel free to remove the post if it is not allowed.
1) https://www.biggerpockets.com/real-estate-listings/rented-double-in-north-collingwood-oh-1180-month
- Built in 1922
- Gross Monthly Operating Income: $1086 ($1180 - $94 (8% vacancy ) )
- Monthly Operating expenses: $567 (PM 10%, Ins 50, Taxes 150, Repairs 5%, CAPEx 5%, Utilities 150)
- Annual NOI: $6,222
- Purchase Price: $69,900
- 25% Down Payment: $17,475 ; Loan: $52,425, Term: 30 yrs ; Rate: 4.25%
- Closing costs: $3000
- Initial Investment: $20,475
- Monthly cash flow(before taxes) : $261
- Annual cash flow (before taxes): $3126.97
- Cash on cash : 15.27%
2) https://www.biggerpockets.com/real-estate-listings/value-add-10-unit-building
- Built in 1899
- Gross Monthly Operating Income: $2880 ($3200 - $320 (10% vacancy ) )
- Monthly Operating expenses: $1615 (PM 10%, Ins 150, Taxes 745, Repairs 5%, CAPEx 10%, Utilities 0)
- Annual NOI: $15,180
- Purchase Price: $181,500
- 25% Down Payment: $45,375 ; Loan: $136,125, Term: 30 yrs ; Rate: 4.25%
- Closing costs: $5000
- Initial Investment: $50,375
- Monthly cash flow(before taxes) : 595
- Annual cash flow (before taxes): 7144.16
- Cash on cash : 14.18%
If I look at just the cash flow, these two listings look good. What about appreciation? Given they are already ~100 years old, isn't there a risk the properties don't appreciate much? Do investors look for a balance of cash flow and property appreciation when they buy? Or do they give weightage to cash flow and then get rid of such old properties after a few years?
If you buy the properties of this kind, what is your idea about the investment?
If you don't buy the properties of this kind, what is your idea behind such a decision?
Thanks