Feedback on 1st deal (Buy & Hold in Logan Square, Chicago)

[Keith Ellis]

I'm in the middle of purchasing what will be my first investment property and would love some feedback on both the accuracy of my analysis and whether this property was a good selection. The main goal with the investment is to find property in an "A" location that will be low risk (very easy to rent) and sufficiently cash flow positive. The property I chose is a condo across the street from the Logan Square CTA train station. I've lived in the neighborhood close to 10 years now and, perhaps naively, thought that even if the investment metrics didn't show that it were a stellar choice, the location might serve to make it worthwhile given the demand and momentum which exists in RE here locally.

The analysis below shows how things look for both 15yr and 30yr financing, and I'm curious to know how people weigh that choice. I went with the 15yr loan putting down 30% to save on interest and get the loan paid off ASAP, since this is a Buy & Hold play. I didn't budget for any vacancies after speaking with another owner in the building I'm buying into. He's had a rental for 3+ years there and never had a vacancy given the prime location. I also already have a tenant lined up for at least the first couple years. The other item I didn't budget for are repairs, although my reason is less than stellar in this case. The condo is turn key ready and I figure my home inspection next week should surface most/all of the big ticket items that might need repairs, which I can try to work into the negotiations between the seller and myself. 

All feedback and constructive criticism are welcome.

Thanks in advance!

Property Purchase
Purchase Price	$ 215,000.00	$ 215,000.00
Down Payment %	30.00%	30.00%
Down Payment	$ 64,500.00	$ 64,500.00
Mortgage Amount	$ 150,500.00	$ 150,500.00
Mortgage Interest Rate (annual)	3.500%	4.375%
Mortgage Amortization Term (years)	15	30
Mortgage Monthly Payment	$1,075.90	$751.42
Property Rental Income
Annual Vacancy Rate	0.00%	0.00%
Monthly Rent - Unit 1	$ 1,700.00	$ 1,700.00
Monthly Rent - Unit 2	$ -	$ -
Monthly Rent - Unit 3	$ -	$ -
Gross Monthly Income	$ 1,700.00	$ 1,700.00
Potential Annual Income	$ 20,400.00	$ 20,400.00
Less: Vacancy	$ -	$ -
Annual Rental Income	$ 20,400.00	$ 20,400.00
Annual Operating Expenses
Property Taxes	$ 1,662.00	$ 1,662.00
HOA Fees	$ 2,496.00	$ 2,496.00
Insurance	$ 201.00	$ 201.00
Utilities	$ -	$ -
Leasing & Advertising	$ -	$ -
Property Management	$ -	$ -
Repairs	$ -	$ -
Maintenance	$ -	$ -
Accounting & Legal	$ -	$ -
Total Expenses	$ 4,359.00	$ 4,359.00
Monthly Mortgage & Expenses	$ 1,439.15	$ 1,114.67
Net Operating Income & Cash Flow Summary
Annual Rental Income	$ 20,400.00	$ 20,400.00
Less: Annual Operating Expenses	$ 4,359.00	$ 4,359.00
Net Operating Income	$ 16,041.00	$ 16,041.00
Less: Annual Mortgage Payment	$ 12,910.78	$ 9,017.09
Net Income / Cash Flow	$ 3,130.22	$ 7,023.91
Net Income / Cash Flow (Monthly)	$ 260.85	$ 585.33
Less: Depreciation Expense (1/27.5 of cost)	$ (7,818.18)	$ (7,818.18)
Taxable Net Income (Loss)	$ (4,687.96)	$ (794.27)
Property Metrics & Analysis
CAP Rate	7.46%	7.46%
Gross Rent Multiplier lower is better	10.54	10.54
Cash on Cash Return (CoC ROI)	4.85%	10.89%
Cash Flow Profit Margin	15.34%	34.43%
Cashflow / Assets	1.46%	3.27%

[Mike D'Arrigo]

@Keith Ellis It looks like the owner in the building hasn't had any maintenance and repairs either. I don't see that you factored anything for that either. You absolutely have to reserve for vacancies and maintenance. Just because the other guy has been lucky and hasn't had a vacancy in 3 years doesn't mean that YOU won't. That's not a realistic assumption. You will have repairs also. Your CAP rates and COC returns are low without vacancy and maintenance. They're going to be a lot worse when you factor those expenses in.