Help Analyze a Potential First Property.

[Eric DeVito]

Hello all! So I found a property that I am interested in. Just plugging in numbers in the BP rental calculator. These numbers are just "guessestimates". Not 100% accurate, I tried my best for a newbie. Anyway let me know what you and if I am missing anything or if I need to adjust anything. This is the property and what numbers the calculator gave me. Thank you.

5 Bed/2 Bath Multi Family home in Staten Island, NY. Built in 1920, recently renovated top to bottom, new central air throughout house and new heating system. This was done between 2011-2012. Asking price is 349,00. It has been on market for about 340 days. In this example I put the home being sold for 320,000.

-- Also it is a two family and I looked up the average rents on rentometer then reduced the rents by 100-200 bucks a month for each unit. 1 unit will be renting for $1500 and the other for $1250. I could probably get 100 more on each though.

Purchase Price: 320,000

Monthly Income: 2,750

Monthly Expenses: 2,272

Monthly Cashflow: 477.15

NOI: 20,040.00

Total Cash Needed: 71,000

Cash on Cash ROI: 8.06%

Purchase Cap Rate: 6.26%

Other Information:

Closing Cost: $3,000

Estimated Repairs: $4,000 (I Just put this randomly, it was recently renovated)

Down payment: 64,000 (20%)

Amortized: 30 Years

Loan Interest Rate: 3.80%

Monthly P&I: 1,192.00

Total Operating Expenses: $1,080.00

Mortgage Expenses: $1,192.85

Also using 50% rule it says my cash flow will be 182.00 per month.

Not sure if you guys need any more information, I am hoping this is enough info to share to see if it is a good deal or not or if the numbers make sense. Kinda my first time doing this.

[Brent Coombs]

@Eric DeVitoWelcome to BP! Very pleasing to see your introduction showing you are keen to jump in at the deep end.

I'm not an expert at analysis, but I like learning, especially from these sort of useful details, and have read a lot of other responses to similar questions.

The first thing I noticed is that your NOI looks to be out of whack. Isn't NOI just your net monthly cash flow, annualized? ie. $477.15 x 12 = $5,725.80 (how did you arrive at $20,040.00)?

The next thing I noticed was your CoC of 8.06%. From most other sources I have come across, swapping the 2% return you might currently be getting for your $71k for a return of $8.06%, when all you have to do is be responsible for a mortgage of $249k for an asset that SHOULD be worth $320k - is not something most investors would recommend. And unless you can SAFELY say that the property can only appreciate and not depreciate, I would also say that this is NOT a "deal". Mainly because how can ANYONE know that this property won't depreciate, leaving you holding the bag?! My 2c.

Hopefully you will hear from other, more seasoned investors weighing in with some expert responses and perhaps a list of  some OTHER things you should also take into account before jumping in. Cheers...