Deal Advice: Attempt #2

[Andrew Taylor]

Okay, apparently my first post was disqualified for some reason. Not sure why - can't get anyone at BP to answer my question. I'm reposting below, removing the links from the original. That's the only thing I can think of that might be a flag-raiser.

Hiya, folks - I'm new around here but would like to jump in and ask for some opinions on a couple of properties I've located. One of them is far too large for me to actually pull off, but mostly I'm interested in "did I run these numbers correctly?" analysis. Both deals look pretty good to me, but I've been accused of wearing rose-colored glasses before.

[Link to Deal 1 removed]

[Link to Deal 2 removed]

Based on my understanding of the "evaluating a potential deal" posts and my spreadsheet based on those posts, Deal 1 has a 12% cap and a 64% COC. Deal 2 has an 11% cap and 51% COC.

Am I doing those calculations correctly? (Hard to verify without posting links to original deals.) Do those numbers seem right to the rest of you? What's your take on these two properties? (Ditto.)

Finally - and this may be a dumb question, so apologies in advance if it is - but why would someone sell a property making as much money as these seem to be making? That's the question my wife is going to ask me when I try to sell her on this plan. "If it's such a money-maker, why is it for sale?"

Thanks in advance for helping a new guy out.

[Edit: Deal 1 is a small tri-plex, offered at $129k, with rents of $1700/mo. Property taxes about $2k. I don't know what to figure for insurance, but pre-insurance cash flow is nearly $700/month.

Deal 2 is a large (6 or 8 duplexes) property offered at $650k, with rents of $8200/mo. Property taxes are about $14.5k, and again, I have no idea what insurance costs would be. Pre-insurance cash flow is roughly $2,700/mo.]

[Nick L.]

@Andrew TaylorSo you need @Mark Graziano's figures for a detailed analysis, but based on a rule of thumb you are at 1.25-1.3% rents as a percentage of purchase price. Generally speaking that indicates a modestly positive cash flow. Whether that's the best deal you can get in your market is up to you.

As to why someone would sell - a million reasons. He's trading up, he's run down his IRS depreciation schedule, he's getting divorced, he is a bad property manager, he needs the money for a sick relative, he found a better deal, he bought the place for a low price years ago and is cashing out, he is moving to Aruba... who knows. The question is whether or not the property works for you.