First deal - Help me analyze...please

[Braden Hobbs]

I'm contemplating putting an offer in on a SFH that is split into a front/back duplex. Each unit has 2bd/1ba and a garage. Let me know if my math looks correct or if I'm blatantly forgetting something please. I plan to put in an offer where my Cash on Cash is above 11% but here are the numbers for sellers initial asking price.

Asking Price - $199,000

Expected Rent - $900 a month per unit(guessing low)

Taxes - $55 a month

Insurance - $100 a month (guessing here)

Vacancy - 8% per unit - $144 a month

Repairs - 5% = $45 a month

CapEx - $200 a month (30+ years old)

PM - 10% - $180

TOTAL EXPENSES: $724

NOI = $1076

CASHFLOW = $266 A MONTH

ROI = 3192/42000 = 7.6%

Thanks!

[John Leavelle]

Hello @Braden Hobbs

What is your primary goal here?  11% COCROI, Good Cash Flow, or Both.

Did you get the numbers from a listing? Did you get any additional info from the Broker/Seller? Or did you develop the data yourself (i.e. Rent $900)? Why do you think it is low? Is it a Duplex or SFH modified to be a Duplex? How is it zoned?

You did not provide any finance information. I assume you were putting $42,000 as down payment (that's about 21.1%). That gives a loan of $157,000. Your NOI ($1,076) - Cash Flow ($266) = $810 for mortgage payment. which gives us a 4.65% APR (30 yrs.)

You also did not include other expense items: utilities, sewer, garbage, snow removal, lawn care. HOA fees. That is why I agree with @Kevin Booker using 50% for expenses to ensure your are making a conservative initial analysis.  In fact I use 55% as recommended by some BP experts.  Until you have actual, verifiable income/expense data from the Seller it is in your best interest to use these conservative approaches.

Is the $42,000 down payment your Total Invested Capital?  What about closing cost, any repairs required upfront (or is it move-in ready), or other miscellaneous expenses you will pay to obtain the property.   They must be included in your Total Invested Capital to determine COCROI.

To get to 11% COC you need to increase Cash Flow or Reduce your total invested capital (or both). That means a much lower purchase price. Somewhere closer to $157,000.

Have you tried the BP Rental Calculator?  It has everything you need.  Quick and easy.