Help me analyze this deal - first buy and hold rental

5 Replies

Hi folks, 

Would anyone be willing to give me a sanity check on my numbers for a buy and hold rental?  

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

my general analysis is the following:

Description: a nice, simple Duplex that doesn't need much work - if any.

How are the numbers:

  • How much down: 20%
  • Interest 3.0%
  • Income: each unit rents for $1k/month.  Total of $2k.  Currently, both sides are leased.  
  • Expenses: 
  • Owner paid water ($35/month), garbage ($50/month), and lawn/snow removal ($50/month). 
  • Budgeting 5% for repairs/maintenance
  • 5% CapEx - new metal roof in 2016, no HVAC system, basic/cheap appliances in decent shape, septic.
  • 5% Vacancy - one unit's lease is up June 1, already have a signed 1yr lease for the new tenant.
  • 10% Management fees - seems about standard.  
  • Taxes, High, low, etc: Taxes in NY are a little different, and generally much higher than the Midwest (home).  The property is currently valued at $94k with almost $4k in taxes per year.  
  • Appreciation: ? 
  • Appreciate any thoughts, or letting me know anything I missed.  
  • Thanks! 
  • Edit... sorry about the formatting bullets - I cant get them to leave :( 

Just a few things jump off at me.

Vacancy - will this property lease up in 2-3 weeks?  8.3% is 1 month vacant equivalent. 

CapEx - You say no HVAC, there must be some sore of heat system and that will get old at some point. Also what about water heaters, is this on public sewer or a septic system,?

Appreciation - I don't count on appreciation.  I look at that as a bonus when I go to sell because its not guaranteed and has many factors that can play into it. 

Closing costs of $3,800 seems a little low with financing, if its under $200,000 purchase I just plan on $5,000.  

And do you have an inspection report on this, because something will probably need to be fixed, just kick in at least $1,500 just a safety. If you don't use it then great but at least you have something.

Sorry if this is kind of long and a downer, just thinking of any possible holes for you to consider and check off. 

@Nathan Zierer Thanks! I definitely appreciate the input, not a downer at all!

This is on a septic, heating is electric baseboards and pellet stove. No AC. Property built in 1996. How much would you budget for CapEx?

The current owners claim the unit is easy to fill, typically when tenants change it is only vacant for 1 week to clean and repair.

I thought closing cost seemed low, this number came directly from the lender but I think I will bump it to $5k. Better to over budget. Similar in the repair, good catch!

@S Moulton , I don't have much experience with septic but I know that you need to clean out the sediment tank every once in a while, 25 years seems like it might be time if it hasn't been done. I don't have a clue what that would cost. But at least your leach field should still be in in good shape at that age, depending on what they used for piping.  The electric baseboards seem to be one of those things that if they work and no one monkeys with them then they just keep working, so I guess I wouldn't worry too much about that - again I am not sure on what those cost to replace if they do go bad.  I would just call around to see what these might run to address it, just so you are aware.

The only hesitation I have with anything you said is one of the primary heating sources is a pellet stove - I just don't trust tenants with flames. My house, I would probably like that for myself but it seems like tenants really know how to find a way to get carried away.