Next deal analysis- Feedback appreciated!

[Collin S.]

Hey guys, I'm starting to get my feet wet with investing. What do you think of this deal? Am I missing anything? I plan to owner occupy one side to start out, but numbers are assuming its fully rented..

$225,000

5% down

[John Leavelle]

Howdy @Collin S.

You need to provide additional information for us to conduct an adequate analysis.  

What type property is it.  2, 3, 4 units?

What are the current rents for each unit?  Which one will you occupy?

How old is the building?  What is the current condition?  Completely rent ready?  No work at all needed?

You need more expenses listed.

CapEx and Maintenance are two separate items and should be accounted for that way. So I assume you are saying 5% for each. Unless you know for sure all systems, components, and appliances are in top condition or new I would increase the CapEx to 10% until you have the property inspected. An inspection will provide you with a more accurate evaluation of the current condition and life expectancy of all major components and appliances. From the report you will be better able to determine a more realistic CapEx reserves requirement.

Property Management should be included in your analysis.  Even if you plan to self manage it is strongly recommended to include the expense for two reasons.  First your time is worth something.  Second, if you are planning to build a portfolio of properties you may need to have PM at some point in time.  You will want the property to still cash flow when that happens.  If you do not include it now you may regret it later.  Besides if you self manage that expense really doesn’t occur.  Add 10% for PM.

Utilities.  Are all utilities paid by tenants?  In multi family properties there still can be common areas covered by the owner

PMI. You will have to pay PMI as long as your equity is below 20%. With only a 5% down payment you obviously are below 20%.

There are multiple other miscellaneous expenses that will eat into your cash flow.  Lawn care, Pest Management, accounting, legal, etc.  Add at least 5% for Misc. expenses.

What is the interest rate for the loan?

You need to be realistic and stay conservative in your analysis.  If the actual expenses are lower then all the better for you.