Potential First Deal Analysis NERVOUS!!!

[Brittney Lynn]

Ok Guys - here it is, be honest. Im a little nervous becuase I think I found a good deal but at the same time I think it is too good to be true and I'm leaving something out.

Triplex House is listed at $640k (similar comps in the area have been selling for $550k or less so I might be able to get this down a good amount with my agent's help)

I am assuming a 30yr fixed at 5% with a 20% downpayment which brings Principal& Interest to $2748

Market rents are: 3bd-1800 2bd-1500 1bd-1100. This house one 3bd, one 2bd and one 1bd, so I can assume a market rent of $4400. (These numbers take into account the rents I would receive after bringing any inherited tenants up to market rent)

Taxes are $441

Insurance is $210

CapEx is calculated at 7% of monthly rents (is that a good number to use?) at $308

Vacancy (NYC) is 3% of gross monthly rents at $132

Maintenance is 3% gross monthly rents at $132

PITI comes to: $3397

Monthly Expenses added up equal $572

Total monthly expenses come to $3969.

If i take the monthly gross rents at $4400 - $3969 total monthly expenses, I am getting $431 in monthly cash flow.

Ill be honest, I am little concerned that I am leaving something out or not calculating something correctly. Can you guys take a look and let me know?

[Dave Savage]

@Brittney Lynn it is normal to be nervous, don't let analysis paralysis set in, but take a hard look at the numbers and the feedback I am sure you will get on the forum.

A few things I saw:

Vacancy at 3% might be right for NYC, but you need to make sure you have a good reserve fund counting on $1000+/mo rents in case it takes you two months to fill a vacancy if you end up evicting someone, or they leave mid-month and it takes a few weeks to turn the property.

Depending on the age of the property I would definitely increase the maintenance to ~7% at a minimum as things will come up and unless it has been recently rehabbed I would expect plumbing, etc issues to be common plus any costs to prep the property upon a turn(unless you are counting on CapEx for that).

The one thing I didn't see you mention was Property Management. Most investors even if they are self-managing at first usually include that as a 10% fee to ensure that if they ever didn't want to/couldn't manage the property they could pay someone to do it. This may be an acceptable risk if you are buying in an area that has historical appreciation both in property value and rents - as you could build in the 10% over time with appreciation in rents.

Good Luck