Deal Analysis - First Investment Property

[James Bavaro]

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

Hey Everyone, 

25 year old Physician Assistant. Heavy stock market index fund investor. Future Real Estate investor. 

Here is an analysis of potentially my first RE investment deal. Please let me know what you think. 

- Sale Price - 600K

- Offering 525K with 10% down payment

- This is a 2bed/1bath over a 2bed/1bath duplex with a fully finished basement with 3beds/1bath that which is LEGALLY part of the first floor unit. 

- All units are currently vacant. I plan on targeting section 8 renters. According to nyc.gov, section 8 offers about $3K for a 2bed/1bath unit. The numbers I ran in the report are at a conservative $2500 per unit, just in case we can't find any section 8 renters. 

As for the basement area, our agent recommended we utilize it via a cheap cash deal by filling it with non-section 8 renters since it is a very large and useful space. I plan on legally turning this area into its own unit at some point, but I understand this is an expensive and lengthy process and do not have the liquid cash to afford it at this time. Will plan on re-investing the cash flow earned on this property towards this idea.

- I ran the numbers with a 3% vacancy. I hope this is the correct way to do it. According to my agent who knows the area well, I won't have much issue searching to fill the units with section 8 renters. Don't know if the time of year would affect me finding new renters or not around the holiday season. 

- Cash Flow = $800-900 per month (This does not include the potentiality for a $1k/month cash deal for the basement area)

- Expenses: New hot water heaters and roofing. The property needs minor touch ups - New painting, definitely some cleaning/scrubbing. There are options to fully renovate the basement bathroom and basement kitchen - I do have relationships/resources that allow for these jobs to get completed for a reasonably cheap expense. 

- Exit Strategy: This is a long term hold. I plan to have it  forever and accumulate properties as I go.

What advice do you have for me? What am I missing? What should be analyzed further? Should I put more money down up-front? 

Any and every piece of feedback is much appreciated. Thank you in advance. 

[Kenneth Williams]

I think you are on the right track. I would do between 5-10% on vacancy. Also, I think you should make sure you are over-estimating repairs. You will see that once you start rehabbing things can get crazy very quickly. If you have any specific questions just DM me.