Need help analyzing a deal. go or no go

[Srinivas Chinnam]

Hello BP members,

I've been reading BP posts, blogs and listening to podcasts. They are immensely helpful to get started on my REI journey. Thanks a lot to the whole community.

My current goal is to build a side income to $2000 per month in the next few years. I like my job and will continue with my job for the near future.

I found a very friendly Real estate agent on BP and working with him to find a SFH in Wayne city, Westland, Garden city or Dearborn heights in Michigan. I've read several posts and blogs on BP on how to analyze a deal.

I found a rehabbed house with new kitchen floor. vinyl windows, new furnace, new ac, new water heater, newer roof. I need help analyzing this, whether i should go or hold on this.

Here are my numbers:

House: $81,000(I wanted 80,000. We havent agreed on the price)

Option1:

Rent: $1100

Capex: 15%($165)

Vacancy: 6% ($66)

Taxes: $200(Wayne county taxes are pretty high relatively)

PM: 12% - $132 (8% monthly + one month full rent. lets say that we need to find a new tenant every two years)

Mortgage (30 years at 6%) : $385

Insurance : $60

$1100 - $1008 = $92

CoC: 5.52%

Option2:

Rent: $1100

Capex: 12%($132). I've decreased the capex because it is rehabbed with new stuff.

Vacancy: 6% ($66)

Taxes: $200(Wayne county taxes are pretty high relatively)

PM: 12% - $132 (8% monthly + one month full rent. lets say that we need to find a new tenant every two years)

Mortgage (30 years at 6%) : $385

Insurance : $60

$1100 - $975 = $125

CoC: 7.5%

Here is how I am thinking. I can get 1100 rent now(3 bedroom). I am not sure if I will get the same rent in 10 years when it is not going to be looking new. My Capex/repairs might increase. Even if I had to put my house at $1050 per month lease, my numbers crumble real bad. In this part of the state of michigan, there is no real appreciation as far I understand.

It is really hard to find deals though. I added myself to several wholesalers list but I dont find anything in the areas I am looking in.

Thanks,

Srinivas