[Calc Review] Confused if I did this properly

[Mathios Yonan]

I'm 17 years old, currently practicing, and I ran into this property and decided to analyze it. I think something about this is incorrect because the CoC ROI is insane. I've listed the 2 sources that I used to fill out the info. Brief Description: Duplex, 3 bed 1 bath each. Listed at 180k. More info about expenses etc is listed in the first link below the calculator report.

**Already Sold**

View report

https://www.noradarealestate.c...

https://www.trulia.com/p/oh/cl...

[Randall Alan]

Quote from @Mathios Yonan:

I'm 17 years old, currently practicing, and I ran into this property and decided to analyze it. I think something about this is incorrect because the CoC ROI is insane. I've listed the 2 sources that I used to fill out the info. Brief Description: Duplex, 3 bed 1 bath each. Listed at 180k. More info about expenses etc is listed in the first link below the calculator report.

**Already Sold**

View report

https://www.noradarealestate.c...

https://www.trulia.com/p/oh/cl...

@Mathios Yonan 

So looking at Cleveland for a 3/1, I see them renting between $1,200 and $1,500. So I would estimate your rental income is about $800/month too high. Your interest rate for an investment property would be closer to 7.x% right now. So you are 2 points too low on that. Your management fees look too high though... should usually be around 10% of gross rent. Your insurance figure of $69/month looks low... but I'm in Florida where we have really high insurance. Maybe it's close, but I would check that figure. Adjusting all that out you end up with a descent COC return of around 24%... which is pretty descent if nothing needs to be done to the property before move-in. Buying leveraged makes a big difference on the COC return figure. The other way to look at a property is the $/door you are making. $400/door is good in today's market. Our "buy point" is if we can make $300/door. Our portfolio as a whole though is currently at over $600/door just to provide some perspective... so while its a solid deal, you can find other diamonds in the rough out there that will do even better.

One thing to keep in mind is that your taxes will reset once the property appraiser sees your new purchase price.  Happens at different times depending on where you live.  In Florida it is the tax year after you buy the property... so in Florida in November you would get a notice from the government that says, "Hey, see you bought a new property...."  and since you likely paid more for the property than the last guy, they usually raise your property taxes to reflect the new 'just value' of your property.  So while that is not a current expense... it is an increase that will come in the not to distant future you should keep in mind. It could cost you a couple of hundred dollars a month more in taxes... just depends on how much more you paid than the last person who bought it.

All the best

Randy