Please Provide Feedback on my First Real Estate Deal.

[Alex Wong]

I have a property under contract in Baltimore. Since the deal is under way, I am looking at this discussion as an autopsy. I already have thoughts on my 

It is a newly rehabbed property. The buyer bought it for $45K and put about $50K of work in (just about). I bought the property for $119,900, and will finance it with conventional loan by putting 20% down. See below for details.

Assumption 

Rental rate is $1,400 per month

5% vacancy

5% cap ex 

5% ongoing expenses

(I am putting 5% for cap ex and ongoing expenses as standard. The inspection came out clean and I don't expect to really that much work in going forward.)

P&I is $500.36 month

Property tax is $167 per month

Insurance is $60 per month

With the assumptions above annual cash flow is about $5,556 a year. Cash on Cash ROI is about 19% and the cap rate is about 9.6%.

I took this deal to my local real estate group for evaluation and I was, let's say, "torn to pieces." They said two things.

1. You don't buy retail as an investor

2. You don't buy a rehabbed house so a tenant can trash it.

While I agree I probably paid market value for it, I feel comfortable the return is reasonable if not spectacular. That's what I would aim for as a first time rental property owner. 

Thoughts? I look forward to being "torn to pieces" again as it will serve as learning experience.

Thanks, 

Alex

[Zachary C.]

@Alex Wong

I'm no analyst so I want to see what the experienced people have to say, but the way I estimate I would put it at around 42 months with no vacancy and no expenses to recoup your investment. Obviously that gets dragged out because there will be expenses. Also, I believe there is an entire forum area for deal analysis and you might want to move this post to that area to get more responses.

Best of Luck