First Investment Property Evaluation

[Steve Cook]

Hi guys,

I'm running the numbers on my first investment and wanted to get your thoughts. It looks like a great deal to me from a numbers perspective. I'm a buy-and-hold investor and am not concerned with appreciation. This is a turnkey property and I'll be conducting reference calls with some of his other clients and talking with the property manager. For other turnkey and out-of-state investors, what other steps have you taken to mitigate your risk from a distance?

Details

Location: Indianapolis

3 Bedroom / 1 Bathroom

Completely rehabbed in 2013, list of renovations include:

New decking, new roof, all new joists, insulation, drywall, all new plumbing, all new electrical, new exterior siding, new flooring in all rooms, new kitchen cabinets, new kitchen counter tops and sink, new shower/tub & surround, new vanity, new toilet, all new light fixtures, new tile flooring, new carpets, new doors, new paint in all rooms.

Financial Analysis

The property is currently leased at $775 for 1-year. I've also assumed $2,500 for closing costs. I'm not sure if closing costs are typically included in cash-on-cash, so I've included that metric with and without closing costs.

[Chris Clothier]

@Steve Cook - I would confirm very carefully the closing costs with the lender. At 20% down, a GSE lender is going to charge you points. If you increase it to 25% you can reduce out that money into bought equity instead of a closing fee. Also expect them to tack on a fee for a low price loan. It will balloon the percentage to purchase price that you pay for closing costs. Neither of these are bad things and they will not make the deal go bad, but you just need to be aware of them.

Lastly, a lot of the advice on here is about percentages which is usually the way we think. With a lower priced house, you really need to think in terms of dollars as well. I am not sure of the poster, but someone pointed out that it would take multiple years to save for a new furnace or hot water heater or A/C unit.... Hopefully you get the point. You need to price these things and account for them now. Either by putting the money to the side in an account that you will not touch, or calculate building that fund with your cash flow over the first year or so while you prepare for what will eventually happen.