Looking to analyze this condo deal.

[Kwame Darko]

Hello BP,

I need help analyzing this deal. This is a foreclosed condo.

2 bedroom, 1 bath 924 sq ft condo

Purchase price: $65,000

Estimated repairs: $14580 ($15 sq ft estimate) for carpet, paint, kitchen, light fixtures.

ARV = ~$100000 - 110000 (Based on what the same condos sold for recently)

20% down payment at 4.5% over 30 years.

Property taxes ~$2700 per year

HOA = $161 per month

Rent = $1200

Expenses = 7% vacancy, 8% cap ex, 8% repairs, 10% property management, ~ $70 for water and sewer and I assumed the HOA pays for garbage. I would have the tenant pay for electricity, heat and gas.

Monthly expenses are calculated at $1,174.01 leaving me with $25.99 in cash flow, 3.28% pro forma cap, 0.92% COCROI and 5.04%. 50% and 2% rule says this is a good. Also, the gain in equity says this is a good deal but based on the return it isn’t. Is there another way to look at this and am I over estimating my expenses. I will be managing the property myself but I like to look at everything as if I weren’t. Any other feedback would be nice!

Thanks,

Kwame

[Thomas S.]

I would flip it to make a quick buck. It is not worth holding as a long term investment. With markets the way they are if there is a recession or turn in the markets you will be stuck for a long time with a losing investment.

With the return as it is it is not worth your effort to hold. Take you money and move on to something better otherwise you are going to end up out of pocket every month and unable to sell.

You need to know what is and is not worth hlding, this one is not in my personal opinion. Take the money and run.