[Calc Review] Help me analyze this deal

[Demarco Brown]

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

[Kevin Sobilo]

@Demarco Brown, I think you did really well using the calculator. Here are a few thoughts though:

1. On the acquisition you have only $1500 in closing costs. In my market this would probably be a little low. I would include at least the heavy hitters like title insurance, transfer taxes, appraisal, and paying my closing agent. In my market I think $2,000-2,500 might be the range I would use but your market may differ. 

2. On the refinance side you don't have any points/fees and depending on the type of loan you refinance that can be a substantial amount. For example, on a DSCR type loan you might be looking at 5% of the loan amount to close that loan.

3. You estimate vacancy at 8% which is conservative. I think most people use 5%, but there is nothing wrong with being more conservative at 8%. This depends on the market and your approach. I estimate 5% but on average I do better than that.

4. Utilities are absent. Often times even where utilities are separate or in a single family there are utilities that are provided by the municipality rather than a private company. When that is the case if that bill is unpaid it can result in a lien on the property!

So, as a matter of practice, I would always include those utilities in the rent if they are a flat fee utility such as garbage. However I would probably bill it back to the tenant monthly if it was based on usage like water. In any event in my area the most common municipal utilities are garbage and sewer which are flat fees and I include those in the rents which is the norm in my market.

5. Estimates are great, but I will often do multiple estimates of the same thing to stress-test the deal.

For example, how does this deal look if the rehab costs 30% more and takes 6 months? If the deal still looks decent in a worst case scenario you can feel more confident in going forward because many things things don't go as planned.

[Jaycee Greene]

Putting nearly $50K in cash into a $125K ARV property seems very high. It looks like you're not going to finance the repairs. Is that correct?