Quick Analysis using 50% rule

[Ryan Fox]

Hello,

Looking to get feedback on anything I missed with this hypothetical analysis using the 50% rule:

1. Purchase price = 100k

2. Downpayment = 20k

3. Closing Costs = 5k

4. Income (Rent) = 12k / year

5. Expenses, using 50% rule, (Including $100/mo managment fee) = 6k /year

6. Mortgage @ 4.5% = $405/month, or $4,860 / year

7. Cash flow = Income - Expenses - Mortgage = 12k - 6k - 4860 = $1,140/year

8. Cash-on-Cash Return = Cash Flow / Investment = 1,140 / 25,000 = 4.56%

9. Principal Paydown = 1,291

8. Tax Writeoffs for depreciation and management fees = 30% of (1,200 + 80k/27.5) = 722

9. Internal rate of return = (Cash flow + Principal Paydown + Tax Writeoffs) / Investment = 3,153 / 25,000 = 12.6%

From what I've learned on BP research and podcasts this seems like a very conservative approach to doing a quick analysis of a deal. I personally feel the Internal Rate of Return, taking into consideration principal paydown and tax write-offs is important. I also understand that there are costs associated with selling so you would really need to hold the property for a number of years to recoup that cost.

But just hoping to see if I missed anything major or if anyone agrees with this quick analysis.

Thank you!