Looking at my first buy and hold property - MO

[Brandon Barnes]

Hi Everyone,

I'm going to check out a property here in Missouri tomorrow morning. It's a duplex in a C neighborhood. 

Asking Price is $69,000. I'll be asking for less but for analyzing, I'll stick with the $69k.

I'll put 20% down. Financing $55,200. Assuming 4% interest. 

It's currently renting at $1,000 gross. One side is section 8. The current lease is through Oct of 2016.

Taxes were $888 in 2014. I'm not sure what the insurance will be yet but I've put in a request from my agent. For now, I'll assume $1,200 a year.

I'll account for 10% monthly for vacancy and 5% for cap expenses. The property has a new roof, new floors, new HVAC, new water heaters and new windows. The seller is having health issues and is selling his properties. 

So to summarize:

Loan Amount: $55,200

Interest Rate: 4% (assumption)

Principal & Interest: $263.53

Taxes: $74/per month (2014)

Insurance: $100 (assumption)

Vacancy: $100

Cap Exp: $50

Total Expenses: $587.53

Total Rent: $1,000

Cash Flow: $412.47

Cash on Cash ROI: 35.87%

So what do you guys think? What else should I be considering? 

Thanks,

Brandon

[Maggie L.]

I'd add in property management fees (if applicable) and maintenance. Usually there is some differed maintenance (which may fall into capital depending on severity) that should be dealt with when you acquire a property.  Depending on how much you're comfortable doing yourself e.g. fixing leaky faucet, changing light fixture, cracks in wall, new paint, 10% of rent per month is a reasonable first guess. You should have a better idea after seeing the property, and update your estimates based on that.

10% vacancy is a reasonable guess, but like the interest rate I would spend some time trying to get something more precise before making an offer.