First Deal, Analysis and Progress

[Alex SImon]

I've been lurking about for quite some time and now I think I've finally got my first deal in the works.  Nothing is final yet,  but the initial offer is being submitted and we'll go back and forth a bit on the price.  The property is a triplex in Leesburg, FL, fully rented and in good condition after the initial inspection, no big maintenance issues that need to be addressed besides some fresh paint.  The neighborhood is good, and the renters in that building have been there a good long while.  While the house was being shown, a neighbor came up unsolicited and asked if there was a vacancy because he had a couple friends who'd be interested.  So provided he's not a shill, that's a pretty good sign that vacancy won't be an issue here.

Numbers!

Price:  100k, which is the highest I'm willing to go on this particular deal.  Asking price is 120k, I'd like to get it for 90k.  I've put together a set of figures for 90 and 100, but I'll just post the 100k figures for now in case I can't get it any lower.  As you can see, the initial numbers for this house are pretty modest.

Gross Rent:  1200 (Way below market value for the area, over a few years we can easily increase this to 1600)

Monthly expenses (Taxes,  10%Property Manager, Insurance, and 10% Repair estimate): 600

20k down payment (not including closing costs in this calculation)

Annual NOI excluding mortgage: 7200

Cap Rate: 7.2%

Monthly mortgage: $382

Cash on cash return: 13.08%

Fast forward two or three years, rent increases to 1600 a month. Now the monthly NOI is $1000, a cap rate of 12% annually with the annual cash on cash return jumping up to 37%. Sounds very good on paper, and everything I've seen of the unit is very promising.