Is my first deal a good deal

[Wayne Marshall]

I'm new to investing have a local investor that mentors me , I'm going to be closing on my first deal and starting to feel nervous and wondering if this deal is a good deal Purchase price $153,000 3 units Unit1- 1 bed /1 bath den living room $750 Unit2 - same as unit 1. $725 Unit3 - 2 car garage $350 Taxes - $5300 Placed on over sized lot bedrooms are very large easily converted into 2 bedrooms all have tenants that are long term no rents have been increased since 2011 average rent for similar apartments in the area are around $900-$950 building has newer main roof (3 years old ) and newer windows comps are 130-220 for the street the appraisal came in at $160,000

[James C.]

Wayne,

Your total rents: $1,775

Ok.. 1% test: 153,000 *.01 = $1,530 < $1,775 so ok there. 50% test: $1,775/2 = 887.50 * 12 = $10,650/0.08 = $133,125, which is a fail. Moving rents to 950 for the living unit rentals makes the 1% still work, and the 50% test becomes $2,250/2 = 1,125*12 = $13,500/0.08 makes it $168,750, so it barely passes.

So, I ran the APOD (not exhaustive on a 2U+extra), see the below.

This is only one approach, and it may all make sense for what you are trying to do, but it should give you a starting place to figure out what you might want to do. 

For me, this is a break even/slight loss deal.

Please let me know if you have questions, or need additional information.

Thank you,

Jim

Acquisitions	Assumptions
Item	Amount	Vacancy Reserves % (STD is 10%)	10%
Purchase Price	$153,000	Repairs Reserves % (STD is 10%)	10%
Acquisition/Closing Costs	$2,500	Recoup % (Std 10% On and 10% of Money)	20%
Down Payment = 20 %	$30,600	Management (STD is 10%)	8%
Loan Amount	$124,900	Monthly Rental Income	$1,825.00
Interest (Yearly)	5%	Yearly Insurance	$1,500.00
Term (Years)	30	Monthly Condo Fee	$0.00
Payment	$670.49	Yearly Taxes	$5,000.00
Result	Monthly	Yearly		Notes:
Cash Flow (Net)	-$449.82	-$5,397.88		10% of and 10% on my money is forced in this deal
NOI	$772.33	$2,648.00		YMMV
ROI		-16.31%		I want to get paid for my time, so 8% manangement
Cap Rate		-3.53%

Moving the rents to 950, dropping reserves to 5% each, along with the recoup % to 10% helps:

Acquisitions	Assumptions
Item	Amount	Vacancy Reserves % (STD is 10%)	5%
Purchase Price	$153,000	Repairs Reserves % (STD is 10%)	5%
Acquisition/Closing Costs	$2,500	Recoup % (Std 10% On and 10% of Money)	10%
Down Payment = 20 %	$30,600	Management (STD is 10%)	8%
Loan Amount	$124,900	Monthly Rental Income	$2,250.00
Interest (Yearly)	5%	Yearly Insurance	$1,500.00
Term (Years)	30	Monthly Condo Fee	$0.00
Payment	$670.49	Yearly Taxes	$5,000.00
Result	Monthly	Yearly	x	Notes:
Cash Flow (Net)	$357.01	$4,284.12	x	10% of and 10% on my money is forced in this deal
NOI	$1,303.33	$12,330.00	x	YMMV
ROI	x	12.94%	x	I want to get paid for my time, so 8% manangement
Cap Rate	x	2.80%	x