Foreclosure, trying to get my numbers right! Advice please

[Luke M.]

Would really like to know what your guys/girls thoughts are on this deal. Am I close to getting the numbers right? What are your thoughts on these numbers if I do for some miracle have them right? Thank you

SFH 3bd 2b Foreclosure homepath home

$65,000 asking price

1296 sq ft

big yard fenced in, concrete driveway

vinyl siding with good looking roof.

I havent been in it yet, going to take a look monday. Assuming all is fairly ok for now..

home last sold in Jun 2008 for $105,900

Here we go again......

Cost Assumptions

65,000

13,000 down

3,000 improvements

2,000 closing fees

Financing

52,000

13,000 down

4.5 apr

20 yrs

328.98

Revenues

950 monthly

11,400 annual

Expenses

Property Tax $2,112

Insurance 600? Not sure how to calculate this Purchase price of the home or is it the assessed value of the home?

Property Management 1,140

CAPEX 1,140

vacancy 950

utilities 120 (2 months enough?)

6,062

NOI

11,400-6,06 = $5,338

Cash Flow

$5,338 - $3,947.76

=$1,390.24

Cap Rate

11,400/70,000 = .16

COC

1,390.24/18,000 = .07

Am I even in the ballpark on these figures? I have been really beating my head trying to learn this stuff! If I only knew I wanted to do this in highschool....

ANY advice is soo much appreciated! Thank you for in advance for looking and sharing..

Luke

[Brant Richardson]

$3k improvements - you need to see it before you can say that.
$2k closing costs - I'm thinking double that.
$600 Insurance - 600-750. Make some calls and find out.
You don't have any repair costs. I use 10%.
2 months utilities - you have that in their for during vacancy? I use a vacancy rate of 10% so I figure between that and repair costs, uitilities during vacancy are covered.

Cash flow 950 - 95(PM 10%) - 95(vacancy 10%) - 95(repair 10%) - 176(property tax) - 60(insurance) - 328(P&I) = +101/mo

yearly 12*101 = 1212 It will likely be better than that with less repairs until you get hit with a big repair like a new roof, then you will be happy you were saving up the 10% in repairs.

[Bill Jacobsen]

CAP rate is the NOI(rent-all expenses except P+I) divided all cost associated with buying property including initial rehab.

You did include cap Ex. but as Brant said, you left out repairs.

Good Luck.

Bill

[Brant Richardson]

With my lender, the insurance has to be based on replacement cost. The lender wants you to be covered to have a similar structure built in case of a catastrophic event.

[Luke M.]

@Brant Richardson Thank you for the help. I dont have any idea of the repairs I just wanted to see if I could analyze it correctly then change the numbers later. So based off of some things i have read on here, $100 a room or better is acceptable?

@Bill Jacobsen I guess I was thinking Cap ex included the repairs.. So Cap ex would just be for the physical assets like roof, siding, furnace, ect? And thank you!

[Brant Richardson]

@Luke M.

Yes, most people want a minimum of $100 per door for the effort of dealing with tenants. Per door meaning per unit, one single family home being a unit. You have a property manager dealing with the tenants and you still have $100/month cash flow so you are doing quite well. That would be a good property, actually very similar numbers to my investments in Kansas City. Your property tax is higher than mine, hopefully that means a higher property value but maybe your area just has higher tax. What is the after repair value on it?

It looks like your analysis is pretty good overall.

For a really quick and surprisingly accurate analysis there is the 50% rule. 50% of rent minus P&I equals cash flow. 950/2-329= 146/mo. It does not take into account property management so 146-95 = 51. It is a quick screening tool to see if a property is any where near cash flow positive. Before buying you would use real numbers.

[Luke M.]

@Brant Richardson

Ok good to know I am starting to get on track with my numbers I think. I upgraded to pro. I have ran a few sample deals on there and starting to feel more comfortable.

I am not 100% on the ARV, it sold in 2008 for $108000. I am going in It tomorrow and hope to find a clean, beautiful, turn key property. Haha

This site is a amazing, a lot because of people like you and everyone else who responds to these newbie posts. I greatly appreciate it.

[Mark S.]

Brant Richardson ,
I thought the 50% rule already factored in property management at 10%. Here's what I thought the breakdown was:

Property Management: 10%
Vacancy Loss: 10% (this could be a tad lower)
Cap-Ex: 10%
Ongoing Maintenance: 10%
Taxes and Insurance: 10% (this could be a bit higher)
=============
TOTAL: ~50%

Am I off here?

[Mark S.]

Luke Moore ,
Goodluck tomorrow, man. I've learned a lot (at least, I think I have) on BP, but have yet to do my first deal (had two offers that ultimately got accepted, but deals fell through for one reason or another). Most of the properties I've looked at barely, if at all, pass the $100-$200/unit rule on here. I'm glad to hear someone tell you that $100/month with a property manager is good. That makes me feel better about the numbers I've been running.

Some people on here are crushing it. As much as I'd love to have $250+/mo property, I just can't seem to find that in my neck of the woods.

Anyway, best of luck tomorrow and definitely keep us posted!

[Brant Richardson]

I actually didn't know the exact break down of the 50% rule. My understanding was that 50% covered "all" expenses except P&I. I figured it was used by people who run their own properties so PM was an extra expense.

When I say $100/mo with PM is good, I am assuming we are talking about a decent looking 3/2, in a B neighborhood with decent schools, where you will get quality tenants and have a reasonable expectation for some appreciation. In a lesser neighborhood/property with higher risk and little hope for appreciation, I would want a higher ROI than this deal. Knowing that this one and others around it sold for over 100k before the collapse gives you some hope that it will get back up their sooner or later, unless a major employer leaves town or something.

Kansas City has tons of properties that would cash flow more than what I am buying but my guy on the ground keeps steering me away from them because they are areas where tenant problems are likely. The most recent steal of a deal I asked about "has a Walmart right behind it that most people wouldn't go to at night".

[Luke M.]

Well went to the house today. Walking in I was getting super excited everything was looking good, too good... New roof, hard wood floors new water heater and 2010 furnace...

Foundation did not look healthy. About every 4 feet there was a beam on the wall that looked like it was a poor attempt at DIY support system. It was anchored in the floor then the top was nailed into the floor joists..(which to me didn't look like it would be to effective) It looked like the entire foundation was had these "Braces" on it..

They are asking 66,000. house sold in 2008 for 108000

Any who would be willing to take this task on if the price of the house was right? Or is there a price for the house that is right?

Just curious...