Feedback on my first Deal Analysis!

[Christina Greaves]

Hey everyone,

I did my first real exercise on analyzing a potential deal and I'd love your feedback on the assumptions I'm making for estimating revenue and expenses!

Context: This is for a Seattle property where the main is a 3 bed / 2 bath and has a secondary unit, also 3 bed / 2 bath. My intention would be to LTR the main, and STR the secondary.

Here are my assumtions: 

• Purchase Price: As listed $875k
• Closing Costs: (2% of Purchase price) + $12k for furnishing the second unit that would be used for STR = $29,500
• Loan details:
  • I'm assuming 0% down on the financing, because I'm thinking my down payment would likely be funded from my HELOC which has an interest rate of about 7%-10%. My plan in fact would be to pay down the HELOC asap as the Stock from my employer vests each month when RSU's mature past the 1 year mark.
  • 30 year loan term
  • 7% interest
• For income I'm using: $9,629/ month
  • This is assuming $3,625 as rent for the main unit, and $6,004 for the STR
  • • For the STR this assumes a daily rate of $329, and an occupancy rate of 60% over the course of the year, averaged to a monthly amount.
• Property Taxes: $534/month (took this from the redfin mortgage estimates)
• Insurance: $328/month (took from the redfin mortgage estimates, and prorated an extra amount to account for mortgage insurance for the first 5 years since I'd be putting down < 20% in the eyes of the lender)
• Repairs and maintenance: 5% (Maybe I should use a higher number given foot traffic on the STR? 
• Vacancy: 3% (saw on ipropertymanagement as the ballpark average for WA state)
• CapEx: 5%
• Management Fees: 0% (I'm planning to self manage for the time being, though I know I should consider adding here ~10% to make sure the deal still makes sense if I wanted to eventually give it to a PM)
• Electricity/Gas/Water/Sewer/Garbage: 0 --> Tenant pays
• HOA: 0 --> N/A
• Other: $100 --> As a buffer for having to pay Utilities during vacancies (Should I add more here to consider ongoing supplies for the STR? Like Coffee, or a Netflix account for it?)

Let me know what you all think of these assumptions, and whether some of the numbers seem too low or too high, and/or any resources you would recommend for me to cross-reference them in doing due diligence!

Thank you thank you!! :) 

Christina