First deal analysis

[Michaela Cheairs]

Hello everyone this is my first deal analysis and I was wondering if I;m on the right track. Any comments are welcomed. 

It's a renovated 2 story, 2 unit building I'm interested in house hacking. One unit is rented and under a new lease. The building is 109900 and has seen a 3% price drop recently. I analyzed from the standpoint of a 3.5% FHA loan and 5% interest rate with 3000 closing cost. I ran the report twice. 1 with the rental income at 625 (what the current tenant is paying and I would be in the other unit) and 2 with the rental income at 1250 (the amount after a year when both are rented).

The house hack scenario:

monthly expense:767.24

monthly income : 625

cash flow: -142.24

Cash on cash return: -24.93%

Full rental scenario:

monthly expense: 767.24

monthly income: 1250

cash flow: 482.76

COC return: 84.62%

Although I would have a negative cash flow for the first year or so I think this a great deal. I would have to pay roughly 142 per month to complete this deal for a year but I am currently renting for 790 so this would put 648 back into my pocket and it has a great cash flow and COC return after its fully rented.

I think it a deal worth doing. What do you all think? How did I do with the analysis? I am learning so much from group and can't wait to do more deal breakdowns.

[Christopher Phillips]

Michaela Cheairs

Even new construction needs maintenance and capex reserves. It's not about the age of the property but about making sure future repairs and major work will be self funded and not out of your personal wallet.