Deal Analysis Thoughts - What Could Have Been

[Ryan Jones]

Hello,

I'm based in Bakersfield, CA and recently put an offer in on a condo. Unfortunately I was beat out by an all-cash offer but this one was the first "deal" I saw that actually had respectable forecasted returns. I'd like to hear your thoughts on my analysis, specifically if you view this as a good deal (as I thought it was) or not and your thoughts on my assumptions - too conservative on vacancy impact?

• Offer price: $170,000
• 20% conventional, 30 years, assume 4.5% interest for rental property
• Assume down payment, closing, minor fixes = $40,000 cash
• Mortgage & Interest: $689
• Property Tax: $218
• HOA: $241
• Insurance: $60
• Property Management: $100
• Maintenance: $50 <-- efficient ~1,000 sqft condo, HOA covers all exterior (also water and basic cable)
• Vacancy: 8.33% ($131)

Total average monthly cost: $1,358

Total average monthly cost w/ vacancy factor: $1,489

Expected rent: $1,575

Averaged expected cash flow: $86 w/ vacancy impact; $217 w/o vacancy impact

Cash on Cash: 2.58% w/vacancy; 6.50% w/o vacancy <-- how does that "feel" for California? This is best I've seen from my analysis of local deals and is hard to understand how others seek 15-20% deals.

Return on Investment - Year 1

• Cash on Cash: $1,032 (2.58%) w/vacancy impact; $2,601 (6.5%) w/o vacancy
• Principal Paydown: $2,149 (5.4%)
• Appreciation: $1,700 (4.3%) <-- assume 1% appreciation after last year's market & that it's a condo
• Total ROI for year one: $4,876 - $6,450 --> 12.2 - 16.1% w/ and w/o vacancy impact

Thank you!