Good Deal?

[Robert P.]

Two Family Property, 2BR/1BA each unit

Purchase Price: $175,000

Gross Rent: $1,800/month (might be able to get more, but let's play it safe)

Monthly Expenses:

Mortgage (includes taxes, insurance): $1,213

PM(10%): $180 (paid to myself)

Water/Sewage: $50

Vacancy (10%): $180

Repair/Maint (15%): $270

Calculations:

Cashflow: -$93/month or $87/month excluding PM since it's being paid to me

Cashflow without mortgage = $1,900 - all expenses except mortgage x 12 months = $13,440

Cap Rate: $13,440 (Net income using the CashFlow with out Mortgage)/$175,000 = 7.7%

In short, I would be getting around $537/month after collecting rent and paying my mortgage and water bill. Does this deal sound good? To add to this, the house is in a GREAT neighborhood (probably the best in the city) and will attract great tenants. It has a massive yard, driveway, and in overall great shape. I just need some help from the experts!!! This is going into month 9 looking for a home to buy!!!

THANKS!!

p.s. hope my math/calculations are all right!

[Matt Lefebvre]

Hi @Robert P., although you can certainly spin it so the numbers look better, the deal is losing you money every month.  Sure it makes $538/mo if you don't account for any maintenance expenses, vacancy expenses, or management expenses, but it would be a huge mistake to look at the number without that.  

If you make sure everything is budgeted for, this property is losing money every month, and even if you don't budget for management, you're looking at less than $100/mo in cash flow.  

I really do not think this is a good deal...