Analysis Paralysis - Please Help

[Sean Pour]

Hi BP Community:

I am about to finally purchase my first SF rental property. The investment doesn't pass the 2% or even the 1% rule (hard to find these days) but the overall performance looks better than what I have found and analyzed so far. The property is in a college town in mid-west  (very low vacancy rate, very high rental demand), tenanted, 4 master bedrooms, each room is rented at $500 a month (a total of $2,000 monthly income). This is a relatively new construction (2016) and the seller just accepted the offer for $210K. Utilities are paid by the tenants.  I am planning to take a loan with 25% down payment. Here is a summary of my analysis. I appreciate any insights or comments. Please let me know if I am missing anything and how you rate this investment. Thanks!

Performance
Total Cash Needed	$56,500
Monthly Income	$2,000
Monthly Expenses	$1,560
Monthly Cashflow	$440
Pro Forma Cap Rate	6.9%
NOI	$14,580
Cash on Cash ROI	9%
Purchase Cap Rate	6.9%
Yield	14.0%
Debt Service Coverage Ratio	1.57

Purchase Estimates	Amount
Purchase Price	$210,000
Purchase Closing Cost	$4,000
After Repair Value	$210,000
Estimated Repair Cost	$0

Loan Details	Amount
Down payment of purchase price	25%
Loan Interest Rate (%)	4.250%
Loan Amount	$157,500
Amortized Over How Many Years?	30

Income	Amount
Total Gross Monthly Rent	$2,000

Fixed Landlord-Paid Expenses	Amount
Electricity	$0
PMI	$0
HOAs	$0
Property Taxes	$215
Water & Sewer	$0
Garbage	$0
Monthly Insurance	$90
Other Monthly Expenses	$0

Variable Landlord-Paid Expenses	Amount
Vacancy (%)	5%
Capital Expenditures (%)	5%
Repairs and Maintenance (%)	5%
Property Management Fees (%)	9%

[Derek Kirkwood]

I don't see anything missing, and I agree with the math.  Overall I like it.  If 9% and $440 is good enough for the $56k that will be tied up then do it.

The only two risky things I see is 5% vacancy realistic with college students?  What about during the summer?  The other one is expenses are at 40%, which seems justifiable with new construction, but maybe run your numbers with 50% expenses and higher vacancy to see if you could weather that storm.  

Good luck!