Double check my analysis of this deal

5 Replies

What do you think of this property for my first deal. SF 5 bed 2 bath currently rents for $1675 and leased through July 2021. It wouldn’t need much done probably just some light cosmetic work. I plan on putting 20% down.

Purchase $165,000

Rent $1675

Taxes $1400

Estimated insurance $1,000

Property management in this area is 8% plus one months rent for tenant placement.

Hello Brian! with what you provided, this looks like a good deal but there is so much more to consider. Other things to consider is location, demand, all expenses including loan terms, an exit plan (long term or short term), an overall game plan, can you raise rent, can you improve that property to increase its rents and value, maintenance, any major expenses now or later, reserves, seasonal expenses, it's proximity to you, the management cost seems a little low for a good property manager (it may be more like 10-12% plus other expenses and depending on their positivity of keeping it occupied and their ability to raise the rent), any school district news, public or school transportation and local stops, amenities, the competition in that area and how are they doing, etc.. I am not trying to be hard on you and you may have already considered this stuff. Your asking for an opinion was a good one. With all of that said it might still be a good deal. It looks like a good deal but I do not know anything about Minnesota except what is on the TV news and that could be biased. You may have already looked at these alternative things. I am from and still live in Dallas, Texas which is probably much different. Thanks for joining and asking your question. Just so you know, I was a licensed real estate broker and in construction for about 30 years around Dallas and wish you lots of of best wishes. Good luck to you!

Greetings, Brian.  If you are looking at the 1% rule, you're good; at least as a rough guide.  As @Michael Lewis Lee aptly stated, lots of ancillary things to consider before one can say for sure if a deal is truly a good one. Have you used the BP rental property calculator yet? I think you get a few free spins before you have to join Pro. This will allow you to add in maintenance, capex, and other things I didn't see in your numbers. Another thing to consider is your down payment. If you're looking at conventional lending, I'm having issues finding anyone in my area to go below 25% on the down payment. That's speaking from the perspective of a newer investor with pretty strong financials. Might want to run those numbers with the 25% just to see if it still works for you. I would think Mankato is a good place to invest. Decent population and a college town, without some of the price inflation of the TC. Also, you mentioned it's leased through 2021, so hopefully your inherited tenants are not living the good life with the moratorium and avoiding rent. Just my thoughts, keeping in mind they are worth what you are paying for them! Good luck!

@Dan W. Thanks for the advice. I have run the numbers, but it’s always good to have an extra set of eyes. I talked to my bank and they are still doing 20% down. If I do pursuer this I will definitely make sure they are current on their rent.

Rent seems high at 1675...make sure you see the actual rent deposits before purchase. If they dont have it documented on a  tank statement consider a reduction of price...or if you feel you can get that than go for it!

@Todd Solberg thanks for the reply. I looked on a few property management websites and it isn’t unreal to get the $1675. I did however run the numbers at $1600 just to be safe and it still cashflows just not as great obviously. With this being my first property I appreciate all advice and will definitely make sure I see actual rent collected to verify the $1675.