My first deal?

[Terry Eriksen]

Good Afternoon,

I come from a very small town in the Midwest and still have some friends that live there as well as family. One of my friends dropped this in my lap last night. 

There seems to be a shortage of rentals for families with pets in that area, and I have received two offers to rent should I decide to go forward with this deal. I know both families and have been friends with them forever as we went to school together. Before we get to the numbers, is doing business with friends a good idea even when it will benefit both parties?

Ok, on to the numbers.

House is a 3/2 on .33 acre. It could use a little lipstick, but doesn't seem to have any major issues other than an older AC compressor. Furnace was replaced in 08. Has a new roof two years ago, siding at the same time. Other people have already had inspections done on the home. 

Asking price is 29k. I have already talked to my hometown bank- gotta love being able to call the president of the bank directly. He approved me for whatever I want without going through the normal B.S. because I have had an account with them for over 30 years. Found out that they also do Portfolio Lending. Score!

With 20% down, that is $6,000. Plus maybe another $2,000 to get the home move in ready

(I can pay my labor in pizza and beer!). Estimate $3,500 in closing costs (Not sure if this is right or not)

Both families are willing to pay $600+/month to live there. 

Taxes @ 1.2% (Assessed for 45k right now) $540/yr or $45/mo.

Insurance $160/yr or $13/mo

Repairs 5% (Is this really right? Seems low to me) $30/mo.

Vacancy 7% (Although I don't think it will be that high) $35/mo

P+I on $23,000 loan + $3,500 in closing costs (or should I pay this instead of putting it into the mtg?)  $142.26/mo.

Monthly Expenses:

Taxes: $45

Ins:     $13

Repairs: $30

Vacancy: $35

Total  $123.00  

Mtg: $143.00

Property will cost me $266/mo total. 

$600/mo in rent. +$344/mo cash flow.  Is this right? Am I forgetting anything?

$344 X 12 = $4,008/yr. With $8,000 invested, that is a 50% COC return.

I feel like I am missing something major here.

I'd really appreciate if someone would look over the numbers for me and let me know if there is anything that I am leaving out. Thanks so much in advance.