Rental Property Analysis - Beginner - Am I doing this right?

[Paul Saechao]

Hi BP family,

I'm new to REI. Just finished Brandon Turner's Book on Rental Property Investing and wanted your help to see if I have my property analysis correct in regards to Cash Flow and CoC-ROI.

The property that I am analyzing is: 3314 W 100th St, Cleveland, OH 44111

Listing info:

-Duplex

-4 bed / 2 baths (2/1 per unit)

-3,097 square feet

-Listed on realtor.com for 449 days. Pro: Possibility to offer much lower than asking price. Con: Property could need MAJOR repairs. No inside pictures on listing.

-Unfortunately, no pictures of the inside and the listing has little information about the property. Let's just estimate a $15,000 rehab.

Purchase Info:

-Purchase price: $57,000

-Down payment (25%): $14,250

-Interest rate: 5% @ 30 years

-Closing costs: Est. $3,000

-Estimated repair costs: $15,000

Rental Info:

-Total rental income: $1,400 (This number is from Rentometer, which shows an average rent of $700/2b unit in this area)

Monthly Expenses:

-Mortgage (P&I): $229.49

-Property tax: $180 (tax rate for this zip code is 3.8%)

-Insurance: $14 (Got this estimate off realtor.com)

-Repairs/maintenance (5%): $70

-Vacancy (8%): $112

-CapEx (10%): $140

-Property Mgmt (10%): $140

-Utilities: $0 (Let's say all utilities will be paid or reimbursed by the tenants)

-Lawn care: $60 ($30 x 2 mows per month)

Final Calculations:

-Monthly expenses: $945.49

-Total invested cash: $32,250

-Monthly cash flow: $453.51

-Cash on Cash ROI: 16.87%

Did I do this right? Am I missing anything?

Thanks!

[Mitch Messer]

Hi @Paul Saechao and welcome to BiggerPockets!

Yes, your property analysis calculations appear to be pretty accurate! (A minor math nit to pick: If total annual income is $1,400 and monthly expenses are $945.49, monthly cash flow would be the difference between these two, or $454.51, but what's a dollar among friends!)

However...

I would challenge some of the assumptions you've made:

• Insurance - I know nothing about Cleveland, but I'd be shocked if the monthly insurance premium for a duplex is really only $14. You'll definitely want to verify that estimate.
• Repairs - I'm guessing $15K is too low. Just looking at the photos of the rear of the property, I'd say you should expect to be doing some major work on the siding, soffits, and fascia, not to mention the roof itself. Plus, on a house built in 1914, you'd hope the electrical, plumbing, and HVAC have already been updated, but if not, you'll be paying a whole lot more.
• Total Invested Cash - You neglected to include the cost of an appraisal, an inspection, and any loan origination fees in your calculation.

Hope this helps!