Our Second SFR: Good enough? Clueless about rehab costs.

[Hilary Hageman]

Hey guys!  Mind giving this deal another pair of eyes?  It needs a face-lift exteriorly but doesn't need much at all inside.  Needs an update on an ugly brick porch (ideas?) and a small area (100 sq ft?) of shaker-type siding to make it cuter.  No clue what these rehabs would cost.

Otherwise, here are the numbers:

- $69,900 asking price.  Offer $60.  Accept no higher than $65.

- 3B/1B, 1,080 sq ft

- Up-and-coming semi-urban neighborhood with lots of city plans for high-end retail and apartment development about a mile from Notre Dame University.

- Taxes: $500/yr

- $850/mo = market rent

- 10% property management = $1,020 (we currently manage ourselves but plan to hire-out management when we get to about 10 properties - we currently have 2.)

- 2% vacancy = $204/yr

- Insurance $500/yr

- 5% repair budget = $510/yr

- Cap ex of $120/mo = $1,440/yr

- Mortgage terms: 25% down, 15 years at 5% interest.

I tried to be conservative with these numbers and cover our rears. Is there anything I'm leaving out? Should we make the offer of $60K? I figure the above numbers to yield a $112.58/mo cash flow and a total ROI (including equity pay-down, but not tax incentives) of 18.9%. Again, this is figuring on property management which we won't use for at least 5 years and a 15 year loan.