Help analyzing deal

[Mark Proctor]

Hi guys, I need some help analyzing a deal.  I'm brand new to this, so there's a lot of things I might say wrong or not say at all.

I'm looking at a condo in Knoxville, TN with 336 sqft.  Asking price is 195,900.  I can put 20% down.  Interest rates seem to be around 7.5%.  The asking price seems extremely high to me, but I just offered 170 to a "sell by owner" and he turned it down because I wouldn't waive the appraisal and apparently he found somebody who would.  The one I'm looking at now is on the market, so I wold hope he wouldn't waive the appraisal.

I'm looking to use it as an AirBnB.  Average monthly revenue for that zip code over the last 12 months is $1,983 (from rabbu.com).  I also see that the annual revenue for condos in that specific building range from 19k to 31k, with most in the mid 20s (from awning.com).

Is this deal worth it?  Thanks!

[Ken Boone]

So at those numbers your debt service is about 1220/mo assuming 1k property tax and $500 insurance (just completely guessing at the property tax and insurance). That works out to $14,640/yr in debt service. You are going have some type of HOA fee as well and expenses. It is a very small place so going to guess at $600/mo in expense including HOA fees. Just guessing - but this is the stuff you need to figure out. So those expenses come to another $7200. Put those two numbers together and that puts you at almost 22k. If you make mid 20s - let's say 25k. You have made 3k for the year or $250/month. Is your time managing guests and issues and cleaners worth the extra $250/month. What happens when the condo association leverages a 3k per client fee for re-doing the parking or red-doing the roof? You make zero that year. The other issue is that a lot places like Knoxville got over saturated with STRs in the past 2 years which means most likely those estimated numbers are going to go down. That kind of stuff can happen.

The deal is only worth it depending on what you want to put in and get out of it.  It would not be worth it to me for a unit that small.