FIRST DEAL - LOOKING FOR FEEDBACK

[Ryan Ohri]

I have my first rental property under contract and close in a couple weeks! I am excited and nervous all at once. I have got through the inspection phase and there are some fixes that need to be done, but overall a fairly well built and maintained property. This is the first post I've made regarding a possible deal, so I was hoping some fellow BP'ers would take a look at my numbers and confirm what I'm seeing. The purchase price is 76,500, annual taxes of 1250 and annual insurance of 780. This is an older property built in the early 1900's but has a good foundation and has been updated along the way. I plan on only holding the property 7-10 years (as the IRR begins to decline after year 7). It should rent for 775-825/ month. We have a 5% vacancy rate in my market and I'm doing a decent rehab up front so I'm only accounting for 10% maintenance cost per month. Finally I will be managing the property myself.

I am financing the initial purchase of 76,500 with a local lender by using a construction loan, they will then have an appraisal done to estimate the ARV. I believe this number will be around 105-115k based on recent comps in the area. I have a rehab budget of 15k-18k and it is conservative. This should get me "All in" for around 90-93k. Whatever the ARV ends up being the bank will lend me a total of 80%LTV and the construction loan will then be refinanced into a 30 year traditional loan at 4.5%. If I'm over the 80%LTV on the refi I will have to bring a minimal amount of cash to closing which I will be using a HELOC to accomplish. I will have some minor carrying costs (interest only loan payment for two months, and utilities). When I ran my numbers I'm looking at a COC return between 11-13% based on a range of numbers as I can't be exact, and a total ROI of between 30-35%, and 9% CAP rate. I believe these to be good returns but was looking at some feedback on my process. Any constructive criticism is of course encouraged. Thanks in advance.

[Brent Coombs]

@Ryan Ohri this is one of those "get rich slowly" ones. Not a "home run", but, gets you started.

Next time, you might be better able to ENSURE that you won't have to leave funds in the deal?

I'm curious, how did you arrive at "a total ROI of between 30-35%"? Is that a typo?

Btw, cap rate is not a useful value-for-money indicator with regards to SFR's.

Please keep us posted as to the accuracy those theoretical numbers, vs reality. All the best...