newbie 2 property deal analysis

[Jon Lafferty]

So here is an interesting newbie deal to analyze. It seems that as I run the numbers the first one seems to be the toughest.

So I have a small savings and raided the 401k because I want to start an REI business. Here is a deal I am analyzing and would like others input.

This is a two property deal. The way the deal is laid out I am getting a good deal on property1 and I am getting a retail price on property 2. This is the only way I could get the good deal on property1 with the amount of cash I have. The plan is to take out a line of credit on property 1 asap and pay off the note on property 2. This would leave me with a $350 / month payment @ 10 years.

Property1 – Purchase @ 45000 paid in cash

Turnkey property with 0 rehab cost

Rented @ 1050 (currently occupied)

NOI - $5259

Cash flow - $438 / month ($92 after 10 year line of credit)

ARV – 65-75k

Property2 – purchase @ 40000, 5k down and owner holds 35000 @ 18 months.

13k rehab cost, 8k of this is oil to gas heat conversion. Brand new gas system.

Previously rented at $950

Once paid in full it will have an NOI of $3854

Cash flow - $321 / month

ARV – 50k

All NOI are after taxes, 6% vacancy and 10% repair costs added in.

So for someone trying to get started what do you think? My gut tells me there are better deals out there but they may be tough with my small amount of startup capital.