Please Help Analyze My First Deal

[Mack Benson]

Hello BP,

We are new to this and trying to invest in the Minneapolis/St. Paul metro area. We have been looking for our first deal for a number of months now and I believe we found one and are looking for feedback from the community. I believe this will be a good candidate to rehab and rent but I’m definitely not an expert in that regard.

The house is an off market side by side twin home. It is a 3 bed 2 bath with about 1,400 sq ft with a walk out and a tuck under 2 car garage. The home was built in 1989 and is in Oakdale, Minnesota. It is in a good location, close to shopping and an easy commute for multiple large businesses but located on a busier street.

I did an extensive walk through today and the rehab includes the need for a new air conditioner, stove, siding, 5 windows and one sliding patio door along with replacing the majority of the flooring as the carpet is beyond it’s usable life. There are some smaller items on the list but those are the major ones I noted. I will be doing the majority of the work save for the carpet and HVAC. I’ve done carpet and did not find it a good use of my time and I did not enjoy it. For the major items we are estimating about $8,000-10,000 so I would am penciling in $10,000-15,000 for rehab cost.

From the comps in the area we believe the ARV will be between $180,000 and $200,000 and the initial thought was we could pick the property up for about $100,000 but after the current owner crunched his break even numbers it looks like we will need to come in at $118,500 to make this deal happen.

If we go through with this we would be looking at closing in the beginning of December and I should be able to hit the ground running with the inside rehab. I’m a little leery of the timing and the exterior repairs in the MN winter but as it is now the house is sealed so if need be the siding can wait until spring.

For financing I’m looking at either a commercial loan 15% down or a conventional with 20% down.

As far as the rent goes we believe the going rate for a 3/2 with a 2 car attached garage in the area to be about $1,600. Being this will be the first and only property in our fledgling portfolio we plan on self-managing and in that case we expect to net between $250-325 per month after taking into account 10% for taxes, vacancy and cap-ex (even though most major items will be under 5 years old) and 5% for insurance.

Being a rookie I’m sure I missed something in my process so any help is appreciated. Is this a good deal? Is this a bad deal?