First time Rental Property Analysis - South Memphis TN

[Presley Balestreri]

Hello, I have been looking at rental properties in Memphis TN area. I have came across a possible property for my first Investment property. I was hoping to get some feedback if the numbers all Look good, This property appears to be a solid property. Tentant is in place Currently M2M since 2021 at $950. Any and all feedback is greatly appreciated! 

BiggerPockets Rental Property Calculator
McKellar Ave
Monthly Income: Monthly Expenses: Monthly Cash Flow: Pro Forma Cap Rate:
$950.00 $658.43 $291.57 8.99%
NOI Total Cash Needed Cash on Cash ROI Purchase Cap Rate
$7,638.00 $14,025.00 24.95% 8.99%
Property Information
Purchase Price: $85,000.00
Purchase Closing Costs: $1,275.00
Estimated Repair Costs: $0.00
Total Cost of Project: $86,275.00
After Repair Value
Down Payment: $12,750.00
Loan Amount: $72,250.00
Loan Points: -
Loan Fees: $0.00
Amortized Over: 30 years
Loan Interest Rate: 4.000%
Monthly P&I: $344.93
Income
Rent $950.00
Total $950.00
Expenses
Electricity $0.00 Gas $0.00
Water & sewer $0.00 HOA fees $0.00
Garbage $0.00 Custom expenses
Vacancy $95.00 Maintenance $47.50
Management $95.00 Insurance $41.00
Property Taxes $35.00 Mortgage Payment $344.93
Total $658.43
Buy & Hold Analysis - 01/09/23 10:05:27
PM Page 1 of 3



Total Initial Equity: -$72,250.00
Gross Rent Multiplier: 7.46
Income-Expense Ratio (2% Rule): 1.10%
Typical Cap Rate: 8.99% Debt Coverage Ratio: 1.85
ARV based on Cap Rate: $85,000.00
50% Rule Cash Flow Estimates
Total Monthly Income: $950.00
x50% for Expenses: $475.00
Monthly Payment/Interest Payment: $344.93
Total Monthly Cash Flow using 50% Rule: $130.07
Analysis Over Time
Annual Growth
Assumptions
2% 2% 2%
Expenses Income Property Value
Year 1 Year 2 Year 5 Year 10 Year 15 Year 20 Year 30
Total Annual Income $11,628 $11,861 $12,587 $13,897 $15,343 $16,940 $20,650
Total Annual Expenses $7,976 $8,053 $8,293 $8,725 $9,202 $9,729 $10,954
Total Annual Cashflow $3,652 $3,807 $4,294 $5,171 $6,141 $7,210 $9,696
Cash on Cash ROI 26.04% 27.15% 30.62% 36.87% 43.78% 51.41% 69.13%
Property Value $86,700 $88,434 $93,847 $103,615 $114,399 $126,306 $153,966
Equity $15,722 $18,781 $28,499 $46,693 $67,767 $92,236 $153,966
Loan Balance $70,978 $69,653 $65,348 $56,921 $46,632 $34,069 $0
Total Profit if Sold $5,349 $12,214 $34,321 $76,583 $126,383 $184,723 $331,821
Annualized Total Return 38% 37% 28% 21% 17% 14% 11%

[Olivia Grabka]

@Presley Balestreri. Our golden rule: max 70 LTV. I don't see the ARV being 30% beyond your all in acquisition and rehab number, which limits your options in the event of a negative event. I would attempt to negotiate the price downward.

I believe the trick to real estate is getting something that is worth a dollar for seventy cents, that way you can always make money. The leverage piece of real estate is critical and since leverage can make you rich, it can also wipe you out in a fell swoop, which is why you have to have equity.

Stick with it, find a better deal.