Am I doing this right? First time to learn not actual deal.

[Joshua Johnson]

I am just trying my hand at analyzing homes for buy and hold. Please any corrections, alterations, comments, or curses would be appreciated and will help me moving forward. Thank you for any help. 

https://www.coloproperty.com/listing/details/300015670

Home in Grand Junction, CO found while looking for a friend at possible homes for their family. Just figured it was as good of a place to start as any.

Here is what I was looking at for the breakdown.

Purchase price - 153,000.00

Financing - 122,400.00 at 4.5% for 30 years = 620.00 per month

20% Down payment (HELOC) - 30,600.00 at 5% for 10 years = 325.00 per month

Rent (Quick look) - 1,200.00 per month

Taxes - (On the website it says 630.00 but on the county website it has a formula with [Tax assessment value x Assessment rate (currently 7.96%) x Mill levy (last year was .088) which turns out to be 153,000 x .0796 x .088 = 1071.73 per year.] 1071.73 / 12 months = 89.31

Insurance - (Quick Google search for average) 106.00 per month

Vacancy Allowance - (Reading BP says factor 5%-15% so I am going with 10%) 120.00 per month

Repair Allowance - (Reading BP says factor 5%-15% so I am going with 10%) 120.00 per month

Capital Expenditures - (Reading BP says factor 5%-15% so I am going with 10%) 120.00 per month

Property Management - (Usually around 8%-12% so I am going with 10%) 120.00 per month

In this I am assuming that the tenant pays all utilities and yard maintenance so that isn't factored in.


So.... 89.31+106.00+120.00+120.00+120.00+120.00= 675.31 Total

So all that added up is....620.00+325.00+675.31= 1620.31 per month

420.31 over the 1200.00 rent
I know the deal won't work on this one I am just looking at my math to make sure I am factoring everything and just trying to start practicing.

Thank you again.

[Sheena Blankenagel]

Hey @Joshua Johnson, nice job at being so thorough! Many new investors don't take a hard enough look and end up with a property that doesn't cash flow, so it's awesome that you're doing this much due diligence upfront.

I reside in GJ and have many local rentals, and I'd say that your rent estimate is spot on at $1,200.

Your insurance quote seems a bit high, most of my landlord policies equate to ~$40-$50 / month. You can certainly talk to your agent and they'll give you a specific and non-obligatory quote on any property you're interested in.

The rental market in GJ is pretty great right now with vacancy ranging from about 3-5%, so I'd say your estimate of 10% is a bit too conservative. Honestly I never even have a vacancy on any of my properties, they are always turned over immediately between tenants.

IMO repairs and capital expenditures are very dependent upon the age of the house and it's current condition. A house built in the 70's will certainly need some upcoming repairs if they haven't been taken care of already (roof, water heater, furnace, etc), but I believe that carving $240 out of your monthly cash flow is going to make it hard to cash flow on any deal...looking at this house on Hall it seems to be pretty much move-in ready. Perhaps just budget to replace one large item per year? Just a suggestion though, nothing wrong with being conservative.

10% for property management is pretty common here in GJ. If you have multiple units managed by them sometimes they'll cut you a better deal. 

Yep, generally tenants pay utilities on SFH, and be sure to let them know what you expect on yard maintenance (and have those expectations written in your lease). And then be prepared to be disappointed, because most tenants don't have a care in the world about keeping your yard in good shape. ;)

Hope this insight helps!