[Calc Review] Help me analyze this deal

4 Replies

Hello BP,

I'm expecting to put an offer down on the property in the report below, but just wanted to see if some more experienced investors think that my assumptions are reasonable. Thank you for taking the time to review!


View report

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



@Jonathan Chan How did you arrive at your soft cost numbers(vacancy,repairs and capex). I know they use those numbers in the webinars, but I find they are not enough in most situations. Sub $1000 per month are the most affected. It costs the same for a service call, A roof replacement won't be significant less for a sub $1000.

My minimum for repairs are $50 and capex $100 per month. Using a 5% vacancy factor is your tenants staying an average of 20 months. 5/100=1/20. If you have to get a covid tenant like some on BP have and can't evict. Some are out 8 months. To get back to 5% your next tenant would have to stay 160 months before turnover. I like to analyse for 8% or 1 turnover per year. You won't be able to get a loan unless you include insurance. $50-$70 per month for rental policy.

@Jonathan Chan I would agree with @Tim Herman , it seems like your expenses are a little underestimated. If your rehab budget includes updating al l of your major “systems”, you may be able to budget a little less for capex/repairs. I am in MI and we have a property tax estimator tool that I use to get a really clear picture on what my taxes will be, especially if it will be a property going from 100% homestead to 0% homestead. Another thing to consider with taxes is the last time the SEV updated. This bit me hard on one of my first properties when the pervious investor purchased the property at rock bottom after the crash. When the property transferred it uncapped the taxes and they increased substantially and ate up all of the cash flow. 

Some additional details about the house would be useful as well: how old is it? What repairs do you plan to do? SFH or multi? As I rule of thumb I always estimate conservatively and plan to be able to handle contingencies. I just had a $400 water bill at an Airbnb property because of a running toilet. Plan for the worst, hope for the best.

Hi @Tim Herman

That breakdown of the vacancy number is really helpful. I never thought of it that way. I've honestly just gone with the examples I've seen in the webinars, videos, etc... This is definitely going to help me improve my estimates. I appreciate your time!

@Nathan Kirgis

It's a SFH that needs plenty of work. It was built in 1950. Based on the rehab estimate, the water heater is fine, but the HVAC needs to be replaced. The roof looks new, so most of this is cosmetic updates. Your insight is very helpful. Thank you.

 

Hi Jonathan my thoughts are your cash invested in that BRRR project is about 20k which is almost a down payment for a 90k property rent ready without the risk of rehabbing .so you are not really rinsing any money out with that process .this deal can be good only if you don't have any other rent ready ones that cashflow in the area you are investing in or as a first time learning rehab experience and that s just my humble opinion thank you and good luck .