Need help double checking a deal

[Harsaha Lenka]

Hi need help analyzing a deal. Im thinking of getting 2 *2 bed and 2*1 bed with the projected rent estimate.the total price is 650 -690k

[Matthew Drouin]

@Harsaha Lenka

I looked at the OM and it’s missing vacancy and collection loss and repairs and maintenance.  That 4% cap rate on in place financials is a lie.  Plus is 4% even in line with market cap rates?

Also what’s your financial objective?  Break even, appreciation focused?

Assuming 7.5% interest rate, the negative leverage would require you to put way more than 20% down just to break even. And how much would you have to spend in order to get market rents? If you are going to move forward with this deal, you'll want to have a review of HOA financials. Self managed HOAs are usually undercapitalized so you want to take a thorough review of the condition of the community to make sure there isn't deferred maintenance because you might get hit with a special assessment if the board isn't setting aside cash for those capital improvements.

At face value, taking into consideration my typical financial objectives, I wouldn’t do this deal unless it was a much lower price.