How do you analyze a Single Fam Buy & Hold?

[Kevin Barrett]

Bought the most inexpensive Single Fam in my area. Literally, the cheapest SF in this particular section of Mass! Purchased a 2 bedroom home (600+ sq ft) for less than $100,000 in a nice town. Interest rate is 4% for 10 years which means the mortgage and taxes will be ~$1,100. 

Will rehab (needs new stairs, interior cosmetics, landscaping, etc) and then live in for a couple years and then most likely make it a rental property (could probably cover the mortgage and taxes if rented now). Need to look at rehab costs more closely, but it definitely needs a fair amount of work.

What data can I analyze to further validate that this is a good deal? I'd be happy to share the address. 

[Chris L.]

Hi Kevin,

That does not produce a great cash flow especially if you consider the potential appreciation.

For example, let's say that you can sell it for 180K and then walk away with a 50K tax free profit (if you live there for at least 2 yrs),  In addition to your 50K in profits, you would have an additional 20K in principle pay down over that first 2 yrs as well giving you 70K to invest.

As a rental, your $1100 per month in rent yields an after expense income of $550 (using the 50% rule).  You now have to pay your mortgage for the next 8 yrs which yields a negative cash flow during that time frame.

My calculation is that you could take your 70K in cash from this investment and either repeat the process or find another investment.