Florida First Deal Analysis

[Ryan Tyler]

My mother owns a duplex in Central Florida, and she wants to give it to me in exchange for paying future property taxes. Caveat is that I can't sell it b/c it is next to my parents house and they dont want it to leave the family.

I have a little more than 12k to spend on repairing the property. Say it takes 10K to fully repair (estimate based on comps in the area). Consideration for the property is $1.

House is valued at 47k about 3 years ago. I am going to rent it to HUD/Section 8 says that renting both sides of the property will be capped at 500 each side. Below are my numbers (I ran the numbers as if I am financing the 10k through HUD at a 30 term, although I'm just losing potential interest 2-4%)

Purchase Price	$10,000.00
Home Value			$47,500.00
Interest Rate			3.5%
Down Payment	6.00%	of the purchase price	$600.00
Amount Financed	$9,750.00
Income
Rent			$1,000.00
Other Income			0
Capital Appreciation Rate	-1.60%	per year of home value	$46,740.00
Total Income	$1,000.00
Expenses
Mortgage	30	year term	$27.08
Taxes	1.05%	of value of home	$41.56
Insurance			$100.00
Flood Insurance
Repairs	10%	of the mortgage	$100.00
Vacancy	10%	of the monthly rent	$100.00
Capital Expenditures	10%	of the monthly rent	$100.00
Water		Tenant pays	$0.00
Sewer		Tenant pays	$0.00
Garbage		Tenant pays	$0.00
Gas		Tenant pays	$0.00
Electricity		Tenant pays	$0.00
HOA Fees		Flat
Lawn Care			$25.00
Property Management			$110.00
Total Expenses	$603.65
Cash Flow	$396.35
Cash on Cash Return on Investment	66.06%
Annual NOI			$4,756.25
Cap Rate			792.71%

Am I missing something critical? The HUD waiting list is packed in the area, but should I account for more vacancy? Repairs? I can't believe that the cap rate could be that high.

I whipped up my own spreadsheet, so I could understand the numbers. I need someone to (gently) pop my bubble here. I have a property management company in mind, plus I have a nephew that will mow the lawn once every two weeks.