Deal Evaluation Advice

[Jason Macht]

I'm relatively novice still, with only two deals under my belt and currently I'm evaluating an off market deal that happens to be right next door to my existing rental. My challenge is gauging whether or not I'm being too conservative in my estimates such that I might price myself out of the deal, or if there are other considerations I should be making that would make the deal an obvious choice. With my current assumptions, the after tax yield is ~4%, with is just mediocre in my view. Here are my assumptions:

• Monthly Rent: $1,700 (1% rule - check)
• Price: $180,000
• Mortgage: $153,000 (@ 5%)
• Down Payment: $27,000 (15%)
• Closing & Pre-Paids: $3,600 
• 5% cap ex
• 5% repairs
• 5% vacancy
• 8% realtor/property mgmt fee
• Net monthly cashflow: ~$126 after taxes/insurance/water/debt

So my question is, am I thinking about this the right way? Is after tax yield the right metric? What other considerations should I account for? Are other approaches I should consider that could make the deal more attractive?

For context...

• Location: Royal Oak, Mi
• I would estimate the house to be worth closer to 190-200k
• There should be little to no rehab necessary, the owner has taken care of it well
• 50% Rule: $1700 - 50% = $850 - $821(debt) = $29 cashflow (not great)

Thanks for the help!