First Deal Analysis Double Check

[Donald Brinkley]

I converted my previous primary residence into a rental when I moved in 2015 and it worked out great. Now I’m looking for my first property to be a rental from the get go. Hoping I can get a double check on my analysis. I’ve found a condo on the HUD listing that needs some work (which I can do, and enjoy doing, myself) that I think I can get for 122k. Based on comps I expect an ARV of 170k and rehab costs are estimated at 15k. I plan to rent it for 1500 per month. For financing, I’m going to put 25% down on a conventional loan at 4.5% with the plan of holding the property for a while. I’ve also thought about maybe a HML for the purchase and then doing a redo, but to be honest my ignorance of that process makes me a little leery to do that. All said and done I’m looking at cash flow of $290 per month after factoring the loan, HOA, taxes, property insurance, and vacancy. I know this breaks the 70% rule (coming in at 80%) so it it still worth doing? Any and all thoughts on the deal and or pointing out things I could have forgotten to factor in too would be great.

[Darshan Patel]

Hey Donald

Did you get cap ex factored in? If so, what number did you come up with. If you can provide figures for your property, on taxes, insurance, HOA etc, We can see what cash flow will come to.

As for HML, they would be the choice if your property can't be "occupied" because regular banks wont loan on those. Though the interest payments would be high.

If your bank would loan you, i would go with them, better rates.   And refinance your money out; important note: once you refinance, your new mortgage payment should be considered too when calculating cash flow.

Of course if you gotta close fast, then HML, if you have time banks.

[Kuba F.]

There’s really not enough information to double check your analysis. How did you come up with 15k for rehab? What’s the age and cost of your capex items over time? Appreciation? Property management provided by yourself?