[Calc Review] Help me analyze this deal

[Joseph Vaughn]

Hey BP family!

I'm running my initial analysis on an investment opportunity in Athens. I want to put in an offer to tie the property up so I can do my homework (approve sellers books, records, leases, property management contracts, preliminary title report, underlying encumbrances, and physical inspection of the property. The property is being sold by a fix n flipper for $245,000 and it has sat on the market for 36 days so far. The flipper took a Class C property in a Class B neighborhood and upgraded it to a Class B property. 

The value add potential 

- increase rents strategically since they are currently under market value

- create additional revenue streams like an affiliate program partnered with a local business that will offer my tenants a service and I'd receive a referral amount

- continue to analyze the revenues and expenses to improve NOI (i.e. hire professional property manager)

This is not a home run deal, but the goal here is to get started and get my feet wet in investing. 

View report

*This link comes directly from our calculators, based on information input by the member who posted.

[Luke Bauer]

@Joseph Vaughn on the list of comps posted by @Jordan Wright, I sold 385 Fowler Dr on 2/25/22, I own a duplex on Freeman Dr which appraised for $210,000 in March 2022, and I own a duplex on Ashmore Dr that appraised for $180,000 in February 2022. In total I have 8 comparable duplexes in Athens, 5 of which I refinanced between Jan-March of this year. Appraisal values for all of these (varying conditions) ranged between $165k-210k. I say all of this because $245k sounds high in my opinion in comparison to what an appraiser will tell a bank it is worth. I can also tell you that this neighborhood will not support B class tenants. Even fully renovated, you will get C class tenants on the majority of the streets in this neighborhood (dependent on your definition of B vs C). The good news is, these type of units at this price point are in high demand. 5% vacancy is a good conservative estimate but a good property manager will have this place rented as soon as it is rental ready (if not before haha). Below is what I have seen as far as rents and average annual expenses in this asset class.

Market Rent:    $1000/unit (fixed up)
Annual total:   $24,000 (Gross rents)

Vacancy:         $1200/yr
Property Tax:   $1750/yr
Insurance:       $1080/yr
Prop MGMT:     $1920/yr (8%)
Landscaping:   $1200/yr
Maintenance:  $1800/yr
Capex: $1200/yr (check age of roof $7-9k to replace and HVAC $4500-5200 to replace)
Total Expense: $10,150/yr

NOI:                $13,850/yr

Mortgage PI:   $13,412/yr (20% down on $210k purchase, 30 yr fixed at 7%)

Cashflow:       $    438/yr

Certainly not a homerun by any means, but it gets you into the property. Some items to consider are the large capex as these will kill your cashflow. Your major expenses will be roof, HVAC, and siding as long as the structure is in good shape. Windows can also be expensive if you have a particularly rowdy tenant... DONT SKIP SCREENING

Value and rents in this area for this asset class have exploded. 120%+ appreciation and 50% rent growth in 4 years. If you don't believe me, look at historic sales of all of these properties on qpublic. While I do not believe we are in for a market crash, I would expect to see these growth rates flatline with rising interest rates. I have a hard time predicting rent growth as demand for these units is still through the roof, but I would imagine they will soften with price stabilization. 

Feel free to DM me if you have questions!

Thanks!