Please Help to Analyze First Deal

[Michael Krassos]

Hi all, trying to decide if I'm just getting cold feet or jumping the gun as a newbie!!

I have a counter-offer on the table for $205k. Please review the following 2-family home in NJ.

Financials

• Purchase Price 205k
• Rental income 2.4k -> Income: 28.8k
• Expenses: 14.2k (Best Case at 34.5% of Income, Worst Case at 49.5%)
  
  • Fixed (Taxes, Insurance,Utilities): 9.9k
  • Variable/Reserves (15% of income) (Maintenance, Vacancies, Capex): 4.3k

I calculate Worst Case Cap Rate: 7.09, and Best Case: 9.2%

Mortgage:

• 25% Down:51.2k
• 4.5% on 30yr fixed
• Mortgage Amount: 154k
• Closing Costs: 11.8k

Total out of pocket to purchase: $63k

I calculate Worst Case Cash on Cash: 8.2% and Best Case: 15.1%

Worst Case Cash Flow: $432.97, Best Case: $792.97 (Assuming expenses remain below the 15% of income

Comps

2-Family comp homes have sold for 160k-220k in last year, and listing price was 235k.

Repairs

• Required
  • Needs windows and door in basement
  • Work to get dryer working
  • 2nd unit needs interior paint
  • May need to break concrete around house to improve water flow away from foundation
• Optional
  • Home will need some work to convert a room in each unit to an official 2-bedroom as no closet and have to walk through one room to access other. Trying to decide if worth doing.

Other

• One unit renter until May14 to section 8, 2nd unit vacant