Newbie Working Through Property I found

[Jason Hodge]

Good Afternoon,

This is a long post, thank you in advance!

I think I found what could be a "good deal", but I'd like some feedback because there seem to be sooo many moving parts in a RE deal, and other than purchasing my home I have never purchased any other properties.

I guess I am looking for: Is this a good deal? If not why? What have I over looked. *My numbers are coming from Zillow/Realtor/Rentometer.com. I haven't contacted an agent yet because I don't want to bother someone until I zero on a REAL good deal. I do not have numbers on repairs because I haven't been in the property or spoken with an agent or contractor, so I am assuming they are low to negligible for now. I know that repair info is much needed data, but how can I go about getting the info without wasting an agent/contractor's time if I am not ready to purchase... anyway, moving on.

Description:

Duplex.Large brick 2 story 2 family home. Maintenance free exterior. Unit #1:  2 bed & 1 bath. Unit #2: 3 bed & 1 bath. Large rooms throughout. Over 2478 sq ft.

Market Value/ARV/Zestimate (low end): $58,000

Asking Price: $35,000

Total Rental Income / m : $1236

Financing

Down Pmt (20%): $7,000

Via 90% LTV HELOC (If I can get one, don't know if offered anymore)

Mortgage: $28,000

Mortgage Pmt / m: $129.67

Closing Costs @ 4% of Asking Price: $1,400

Via 90% LTV HELOC (If I can get one, don't know if offered anymore)

Monthly Expense Estimates (Other than mortgage)

Property Management @ 10% of total rent: $123.60

Vacancy @ 10% of total rent: $123.60

Property Tax: $100

Insurance @ 10% of total rent: $123.60

HELOC Interest Only PMT @ 5%: $35

Monthly Cash Flow After All Expenses: $600.53

Total Y1 Cash Flow: $7,206.33

Paying off the HELOC:

After 12 months, and basic improvements, get the house to an ARV of $58,000 (This was the Zestimate for the property on the low end of the scale). Refinance @ 80% of ARV, for a mortgage of $46,400. Using this money, I would pay off the original mortgage of $28,000 as well as my HELOC balance of $8,400. This would leave me with $10,000 cash in hand, and a fully restored HELOC ready for the next deal. The new mortgage PMT would reduce monthly cash flow to roughly $461. If the ARV is closer to the Median Zestimate for the neighborhood, $49,600, the change is the cash in hand is reduced to $3,280 and the new mortgage PMT would reduce monthly cash flow to roughly $546.

Price History

02/20/16 Price change $35,000 +21.1%

01/23/16 Price change $28,900 -22.9%

11/24/15 Listed for sale $37,500 -16.5%

Neighborhood Info

Median Zestimate: $49,600

Foreclosures (per 10K): 11.7 compared with 7.6 in Cincinnati & 3.1 for United States

Why I think this is a good deal:

Rent to Price = 3.5% (greater than 2% rule)

Cap Rate = 42.4%

Asking Price is @ 60% of Estimated ARV (meets 70% rule)

The Monthly Cash Flow of $600 leaves me with a lot of wiggle room if my numbers are wrong or I need to put a few more thousand dollars into the property from my HELOC.

Although I have been working the numbers based upon $35k asking price & having not seen the property, I am actually assuming that I could get it for less since only a few months ago the property was $7k cheaper.

Thank you for reading, please give me plenty of constructive criticism - but please try and be specific in your answers if possible.

Thanks,

Jason