How to calculate rehab cash into buy and hold investments?

[David K.]

So I have become somewhat comfortable with straight-forward calculations for buy and hold investments. Things such as 1% rule; CoC values and ROI are now very clear; I also automatically add 5-7% vacancy and also roughly 10% maintenance costs to all calculations...

But, I am still struggling with understanding how the money out of pocket for rehabbing costs play into the whole picture of deciding whether the investment is good or dead.

Here's the example:

I purchased duplex with 25% down and conventional 30-year loan. Purchase price was 252K. Total payments per month are around 1500 - these include mortgage, taxes, insurance, hoa. The total rent is 2300 and we pay 8% PM fee so cashflow is roughly 550-600/mo. So to me the cf is great. I also know that the property is in great A location with best schools.

Tenants below moved out as soon as we purchased it, and we put in around 8k to renovate and then rented out. The prior tenants used to pay 950 and we were able to rent it for 1250 to new tenants.

Tenants upstairs stayed and continued paying 950/mo but after 3 months also moved out. They asked if their relative could rent the place and we gave them an option to move in as is for 1050 or we renovate it and then the price would be 1250. They chose to move in as is.

Now, for cap ex - we know that we will have to change the roof and one central AC unit for first floor so we are looking at additional 11K in spending.

So the question that i have for myself is does this sound like a good deal or bad deal? The CF is great and will become even better once we clean up the 2floor unit but we keep on spending cash...I do not think that we do the refi game bc we really did not make any add-on value...

Please let me know what you think!