Help Analyzing a property

[Scott Garvin]

Hi everyone... I'm a newbie that is getting his feet wet analyzing properties. I found one on the MLS and ran number against it and wanted to know if I am doing it correctly or if anyone has pointers,

Here is the rundown:

Sales Price - 37,000

25% Down Payment (from a HELOC) - 9,250

Remainder - 27,750

Closing Costs - 4,000

Mortgage - 31,750

Income:

Rent - 750

Payments:

Mortgage & HELOC (@6%) - 293.78

Tax - 75

Insurance - 100

Repairs (5%) - 37.50

Vacancy(7%) - 52,50

Property Mgmt(10%) - 75

Total - 633.78

Cash Flow - 116.22

I want to pay off my HELOC as quick as possible, so that should up the cash flow to 219.64

Please provide some feedback

Thanks in advance for your help!

[Josiah Kay]

Hi @Scott Garvin

A few things -

1) $4,000 in closing costs seems extremely high. Are those actual figures?

2) You seem to be wrapping in your closing costs with your loan amount. This is going to inflate your ROI because you are amortizing your closing costs over the life of the loan versus paying them up front. Unless, of course, your lender is truly wrapping the closing costs into the loan.

3) I don't know the area of the property, but $100/month seems high for insurance on a $37,000 house. Have you called around and received quotes from some local insurance agencies? If not, I would recommend doing that and comparing the prices. 

4) $900 in property taxes? That's sweet. 

5) Who is paying for water/sewer/garbage? 

6) I would add in CAPEX (capital expenditures). I typically estimate 5% of rent amount.