Deal Analysis - My First Investment Property

[James Bavaro]

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

Hey Everyone,

25 year old Physician Assistant. Heavy stock market index fund investor. Future Real Estate investor.

Here is an analysis of potentially my first RE investment deal. Please let me know what you think.

- Sale Price - 600K

- Offering 525K with 10% down payment

- This is a 2bed/1bath over a 2bed/1bath duplex with a fully finished basement with 3beds/1bath that which is LEGALLY part of the first floor unit.

- All units are currently vacant. I plan on targeting section 8 renters. According to nyc.gov, section 8 offers about $3K for a 2bed/1bath unit. The numbers I ran in the report are at a conservative $2500 per unit, just in case we can't find any section 8 renters.

As for the basement area, our agent recommended we utilize it via a cheap cash deal by filling it with non-section 8 renters since it is a very large and useful space. I plan on legally turning this area into its own unit at some point, but I understand this is an expensive and lengthy process and do not have the liquid cash to afford it at this time. Will plan on re-investing the cash flow earned on this property towards this idea.

- I ran the numbers with a 3% vacancy. I hope this is the correct way to do it. According to my agent who knows the area well, I won't have much issue searching to fill the units with section 8 renters. Don't know if the time of year would affect me finding new renters or not around the holiday season.

- Cash Flow = $800-900 per month (This does not include the potentiality for a $1k/month cash deal for the basement area)

- Expenses: New hot water heaters and roofing. The property needs minor touch ups - New painting, definitely some cleaning/scrubbing. There are options to fully renovate the basement bathroom and basement kitchen - I do have relationships/resources that allow for these jobs to get completed for a reasonably cheap expense.

- Exit Strategy: This is a long term hold. I plan to have it forever and accumulate properties as I go.

What advice do you have for me? What am I missing? What should be analyzed further? Should I put more money down up-front?

Any and every piece of feedback is much appreciated. Thank you in advance.

[Abel Curiel]

Quote from @James Bavaro:

View report

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

Hey Everyone,

25 year old Physician Assistant. Heavy stock market index fund investor. Future Real Estate investor.

Here is an analysis of potentially my first RE investment deal. Please let me know what you think.

- Sale Price - 600K

- Offering 525K with 10% down payment

- This is a 2bed/1bath over a 2bed/1bath duplex with a fully finished basement with 3beds/1bath that which is LEGALLY part of the first floor unit.

- All units are currently vacant. I plan on targeting section 8 renters. According to nyc.gov, section 8 offers about $3K for a 2bed/1bath unit. The numbers I ran in the report are at a conservative $2500 per unit, just in case we can't find any section 8 renters.

As for the basement area, our agent recommended we utilize it via a cheap cash deal by filling it with non-section 8 renters since it is a very large and useful space. I plan on legally turning this area into its own unit at some point, but I understand this is an expensive and lengthy process and do not have the liquid cash to afford it at this time. Will plan on re-investing the cash flow earned on this property towards this idea.

- I ran the numbers with a 3% vacancy. I hope this is the correct way to do it. According to my agent who knows the area well, I won't have much issue searching to fill the units with section 8 renters. Don't know if the time of year would affect me finding new renters or not around the holiday season.

- Cash Flow = $800-900 per month (This does not include the potentiality for a $1k/month cash deal for the basement area)

- Expenses: New hot water heaters and roofing. The property needs minor touch ups - New painting, definitely some cleaning/scrubbing. There are options to fully renovate the basement bathroom and basement kitchen - I do have relationships/resources that allow for these jobs to get completed for a reasonably cheap expense.

- Exit Strategy: This is a long term hold. I plan to have it forever and accumulate properties as I go.

What advice do you have for me? What am I missing? What should be analyzed further? Should I put more money down up-front?

Any and every piece of feedback is much appreciated. Thank you in advance.

 Hello James,

The deal looks pretty solid here. I'd defer to your agent regarding offer price but from a quick glance, $525K seems a bit low. Did you already get an offer accepted at this number? If so, congrats!!

This will be delivered vacant and has only been on the market for 2 days with decent numbers - 8 saves and 300+ views. My guess is this will sell for more than your projected price but for your sake, I hope I'm wrong! With this low inventory and high demand market (especially with rates lowering this past week), I'd recommend going with a higher down payment if you can swing it. 

Location seems to be pretty good as you're a short walk from a train station. 

A couple of things I'd recommend changing on the analysis:
- factor in utility expenses for the 1st fl and basement units. Although you can add this into the monthly rent, I'd account for it since most properties do not have separate electric & gas meters for the 1st fl and basement
- factor in a 5% vacancy rate which is roughly 2 vacant weeks/year. 3% is a bit unrealistic especially if you'd need to put in a little work post-closing to get the units ready for new tenants
- factor in water expense since this is typically paid for by the landlord in NY
- consider a 3-5% maintenance expense to cover any miscellaneous maintenance requests from tenants

Aside from that, your exit strategy sounds solid. Hold, Hold, Hold!

All the best!

Abel