PLEASE HELP ME ANALYZE A DEAL

[Darshil Parikh]

I have come across a property - new construction, 4 beds, 2.5 baths $285K. With 25% down, 3.5% interest rate, 30 year term - my monthly mortgage including taxes ($500) insurance ($60) and HOA ($35) is around $1,500. Property rents for $1,900. It's a single family, all four bedrooms are on 2nd level. I would make $300-400 since I'll be managing the property.

Cons: It’s a developing area, still feels like in middle of nowhere, and schools are not good.

Pros: 20 minutes to downtown, cash flows, new construction so all the warranty and no repairs or expenditures for a long time, and potential for development.

Please let me know your thoughts, I feel this seems like a good investment.

[Jaron Walling]

@Darshil Parikh It sounds like a nice property but I can tell you it won't cash-flow. There are quite a few expenses that you left out (vacancy, maintenance, CapEx, managment). What about the $12K for closing costs? After running the numbers in my spreadsheet you cash-flow $36 per month.

As a rule of thumb it smart to chase the 1% rule... $285K, rents for $2800 per month. This deal doesn't even come close. From an investment stand point you'll have roughly $82,650 into the property, assume no repairs. Obviously that's a lot of coin unless you bank on appreciation or have another strategy.