First Deal ...jitters. and help

[Bryan Cataldi]

Could use ya'lls thoughts. Here's the deal I'm under contract on...120 purchase, 2.875 rate, 10% down, conventional (2nd home I have to buy this as)...house needs rehab...assuming about 20ish. so 140 all in, 160-165 ARV. Under the current numbers, should cashflow about 150 including pretty conservative reserved estimates. My catch is, it will take about 12 for the down payment...4 for closing costs...another 20 in rehab. Cash out of my pocket is about 36K.

Cash on cash at that point is only about 6%. This is my FIRST deal. So, cash on cash to me is low...and it sucks up a lot of cash to do this deal and make it work. However, it's my first deal and the experience of that is worth something. I think I'm overpaying by 5-10k - but in this market and area and with these sellers who have been pretty reluctant to work with me on much, it is what it is.

Would ya'll do it given how much cash it will lock up and the low cash on cash or ...keep looking. Btw, good area...appreciation has been steady. Decent school district, etc

[James Bradin]

Hey Bryan, congrats on going after your first deal.  I know how stressful it can be, it does get less stressful over time. Especially when you get better at running the numbers.  Most people do not hit a homerun on their first deal.  

Brandon Turner talks a lot about his deal funnel. Specifically analyzing hundreds of properties with things like the 1% (formerly 2%) rule and 50% rule.  Then once you have a solid list of <10 properties, taking the time to analyze those more in depth.  So my first question would be, how many deals have you analyzed?  

Secondly, having done multiple rehabs on my properties I can almost guarantee that you will go over budget and over timeline early in your REI journey. So with this being your first deal, I would be overly conservative on the numbers that you run.

Finally, a 6% return is not that great. On average you can expect 8-10% from investing in the stock market (even more if you invested between Mid-march and May). Who knows what the stock market will do, but the housing market is pretty high throughout the entire country right now. It might behoove you to continue to analyze properties and wait until you find a deal that would make at least 10%, that way if the rehab does go over budget you might still be at 8%. If it is a flip and the numbers come out low, you can keep it as a BRRRR.

I am sure that you already know most of this, but hopefully something in here is helpful.