Fellow investors, I have a deal analysis question. My plan is to house hack and I'm having trouble getting numbers to cash flow AFTER I move out. It's almost impossible to get a property to cash flow while you live there but I'm also having trouble seeing cashflow after my departure. Market rent in my area for duplexes is about $1,300. My plan is to go 5% conventional financing. Here is an example: Home Type: Duplex Purchase Price: $200,000 (in my area, this would be purchasing a property at a pretty decent discount. My plan is to walk for dollars and call potential distressed landlords) Loan Amount: $190,000 Loan Details: 7% interest rate amortized over 30 years INCOME Rent: $2,600 (assuming both units rent for $1,300) Total Income: $2,600 EXPENSES Monthly P&I: $1,264 PMI: $158 (1% of loan amount) Homeowners insurance: $100 (estimate for my area) Vacancy: $130 (5% of rent) Capex: $260 (5% of rent) Taxes: $450 (monthly estimate for my area) Total Expenses: $2,362 Total Income - Total Expenses = $2,600 - $2,362 = $238 This is excluding future property management, potential lawn care, snowcare, utilities that I'd have to pay etc. There are some properties that rent for upwards of $1,400 in my area but all have extra features like central air. It's highly unlikely that I could purchase a property with central air at a significant enough discount to make the numbers work. Would love to hear your thoughts.

You have to classify neighborhoods based on price, demand, risk profile. We use A, B, C, D, F.... I don't buy D's or F's and will rarely pick up a C unless the cash flow is so much I can't walk away. B class is where most people house hacking find the most value. I can't tell you what your area would be classified because I am only an expert in WNY. I can tell by cash on cash returns what classification a neighborhood normally is. 1-3% returns (assuming 25% down) is A. B is normally 4-8% and F is 20% + and so forth. I would advise you to start with knowing what an A, B, and C class area is before you worry about calculating cash flow.

You seem to be on the right track. One potential issue pops out. You have $260/mo for CapEx. On a well-maintained property, this feels like a decent enough figure to start with for long-term improvements. However, you are most likely to get a discount on a property that needs an up-front infusion of capital. A good example is the need for a $20,000 roof. The seller may be selling because the roof is starting to go and they don't have the cash. You might get more than a $20K discount if you can handle the roof repairs as part of the purchase.

I would not touch this. I would rather buy all in 120kihs, with rents of 1800 and taxes under 2500, Much better ROI. One of my guys is on his way to look at 2 duplex and a SF on one lot for all in 145k, gross rents of 36k net about 25k, that's more my style You can do better than what you are presenting,

Here is my two cents. There is more to analyzing deals than subtracting expenses from revenue. We analyze deals by location first, asset condition second, and returns last. I value location and asset condition over returns. Valuing location and asset condition over cash flow has lead to large cumulative returns. Your property is not cash flowing because you are only putting 5% down. Get a good property and a good location and you will have quality tenant demand. Quality tenant demand is different than tenant demand. While you live there spruce the place up, add air conditioning, replace light fixtures, paint, etc.. By the time you are ready to move out rents should be up and you should be close to cash flowing. Don't forget to calculate appreciation, debt paydown, and variable costs.

Hi Benjamin, Find a property at a discount. If it needs repairs, include that in the purchase price. Find properties that you can do a value add, like in unit washer & dryer, appliances, kitchen/cabs, find something that WILL add value. You can look up what're the best things to add value this year. With adding value you've got to raise rents. Utilities, snowcare, & lawn can be included into the rent. Those are all services they benefit from & you don't have a 100 unit that can cover those expenses, it's reasonable. Manage the property yourself if you're still tight after all of the previous mentioned things. If not, get a trust prop manager & build that relationship. Use your extra time to make more money. I hope this helps some. We look forward to your success & prosperity. Ownership is Freedom.

Bob, Grateful for you response. Would you be willing to provide more insight into how your guys find these deals? What areas of Cleveland are they in? I do believe that I can do better as well. Trying to find a feasible way to get started with limited capital. Thank you!

Am I Analyzing Deals Correctly?

Matthew Irish-JonesBusiness Member

Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes

2y

Quote from @Bob S.:

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Greg Scott:

Quote from @Bob S.:

The roof on an avg duplex in Cleveland will be 6- 8k, not anywhere near 20k,

$6K is not a believable number for a re-roof of a duplex unless you are severely cutting corners.

100% not, there about 20- 25 sqt, (maybe you are assuming its 50- 60 sq ?) at 280-300 per sqt .If there is sheathing that needs replacing sure a bit more, but not anywhere near 20k. That would be 700+ per sq. That would be the highest price anywhere in America, I am not speculating I have done 100s. It's about 130- 150 per sq to buy it so how can they charge 500 in labor for ONE DAY work, that's insane.

All the best

Standard tear off roof replacement cost in Buffalo NY is $20,000-$25,000 depending on pitch, gutters, carpentry work, etc..

I have had one as low as $16,000 for a unit with a roof that was not very high up, no carpentry work, and tons of room between neighbors.

Impossible to know is that is a good price or not, it goes by the number of squares. We never pay more than 240- 280 per sq, So if 30 sq well,,,,,,, Avg in Clevland is 20- 25sq, Guys I am not speculating, I do about 150k a month in reno/ repairs

All the best

Thats on a standard duplex with sq ft of 2200-2500 (I wouldn't know roofing squares). I am also not speculating we manage over 600 units and facilitate 10+ roofs per year and shop multiple vendors.

I am not telling you your numbers are wrong, I am telling you the market cost in WNY for a full tear off on an average sized double in the city of Buffalo.

wow those must be some big roofs, It cost about 150 a sq to buy ,

Keep crushing bro, 600 units, GREAT1!!! PM sux right LOL,

LOL, welcome to NYS. Its not the material its the labor and insurance. I got into the PM business because I could not find a decent PM business. I look at it as a necessary evil to be able to assure quality returns for myself and our clients.

Irish Jones Realty4.947 Reviews

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Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

2y

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Greg Scott:

Quote from @Bob S.:

The roof on an avg duplex in Cleveland will be 6- 8k, not anywhere near 20k,

$6K is not a believable number for a re-roof of a duplex unless you are severely cutting corners.

100% not, there about 20- 25 sqt, (maybe you are assuming its 50- 60 sq ?) at 280-300 per sqt .If there is sheathing that needs replacing sure a bit more, but not anywhere near 20k. That would be 700+ per sq. That would be the highest price anywhere in America, I am not speculating I have done 100s. It's about 130- 150 per sq to buy it so how can they charge 500 in labor for ONE DAY work, that's insane.

All the best

Standard tear off roof replacement cost in Buffalo NY is $20,000-$25,000 depending on pitch, gutters, carpentry work, etc..

I have had one as low as $16,000 for a unit with a roof that was not very high up, no carpentry work, and tons of room between neighbors.

Impossible to know is that is a good price or not, it goes by the number of squares. We never pay more than 240- 280 per sq, So if 30 sq well,,,,,,, Avg in Clevland is 20- 25sq, Guys I am not speculating, I do about 150k a month in reno/ repairs

All the best

Thats on a standard duplex with sq ft of 2200-2500 (I wouldn't know roofing squares). I am also not speculating we manage over 600 units and facilitate 10+ roofs per year and shop multiple vendors.

I am not telling you your numbers are wrong, I am telling you the market cost in WNY for a full tear off on an average sized double in the city of Buffalo.

wow those must be some big roofs, It cost about 150 a sq to buy ,

Keep crushing bro, 600 units, GREAT1!!! PM sux right LOL,

LOL, welcome to NYS. Its not the material its the labor and insurance. I got into the PM business because I could not find a decent PM business. I look at it as a necessary evil to be able to assure quality returns for myself and our clients.

Hmm sound like we both have the same way of thinking for PM ,

All the best sir,,,,,, If you come to FL Palm Beach area let me know, Its A LOT nicer here then where you live in the winter LOL

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Alecia LovelessPro Member

Member since 2019 · 3k+ posts · 2k+ votes

2y

@Benjamin Sulka You can probably find a better deal than that because I have just kind of window browsing the Cleveland area.

I’m in a much higher price area than Cleveland and I’m finding better deals than that with some of the comparative numbers such as rents and a few of the expenses like insurance and taxes.

Keep looking, don’t get discouraged, and don’t rush into a bad deal just to buy something. If possible continue to build your network, attend real estate meet ups and stay focused. Be ready to pounce on that great deal when you find it! Before you know it one will present itself and you need to be ready to take action! You’ve got this.

1 Reply

Benjamin Sulka

OP

Cleveland, OH · Member since 2022 · 811 posts · 578 votes

2y

Quote from @Alecia Loveless:

@Benjamin Sulka You can probably find a better deal than that because I have just kind of window browsing the Cleveland area.

I’m in a much higher price area than Cleveland and I’m finding better deals than that with some of the comparative numbers such as rents and a few of the expenses like insurance and taxes.

Keep looking, don’t get discouraged, and don’t rush into a bad deal just to buy something. If possible continue to build your network, attend real estate meet ups and stay focused. Be ready to pounce on that great deal when you find it! Before you know it one will present itself and you need to be ready to take action! You’ve got this.

Alecia,

Thanks so much for the encouragement!! Keep doing great stuff on the forums. I always enjoy hearing what you have to say.

0 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

2y

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Matthew Irish-Jones:

Quote from @Bob S.:

Quote from @Greg Scott:

Quote from @Bob S.:

The roof on an avg duplex in Cleveland will be 6- 8k, not anywhere near 20k,

$6K is not a believable number for a re-roof of a duplex unless you are severely cutting corners.

100% not, there about 20- 25 sqt, (maybe you are assuming its 50- 60 sq ?) at 280-300 per sqt .If there is sheathing that needs replacing sure a bit more, but not anywhere near 20k. That would be 700+ per sq. That would be the highest price anywhere in America, I am not speculating I have done 100s. It's about 130- 150 per sq to buy it so how can they charge 500 in labor for ONE DAY work, that's insane.

All the best

Standard tear off roof replacement cost in Buffalo NY is $20,000-$25,000 depending on pitch, gutters, carpentry work, etc..

I have had one as low as $16,000 for a unit with a roof that was not very high up, no carpentry work, and tons of room between neighbors.

Impossible to know is that is a good price or not, it goes by the number of squares. We never pay more than 240- 280 per sq, So if 30 sq well,,,,,,, Avg in Clevland is 20- 25sq, Guys I am not speculating, I do about 150k a month in reno/ repairs

All the best

Thats on a standard duplex with sq ft of 2200-2500 (I wouldn't know roofing squares). I am also not speculating we manage over 600 units and facilitate 10+ roofs per year and shop multiple vendors.

I am not telling you your numbers are wrong, I am telling you the market cost in WNY for a full tear off on an average sized double in the city of Buffalo.

If you've got a Cleveland duplex that's got got an existing slate roof that you need to replace you are absolutely going to be spending around $20k.

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