Making Estimates for the Property Analyzer

[Tony K.]

We're trying to do a deal analysis on a condo on the beach to be used as investment property and vacation home, but it seems like there's a lot of guessing involved. How do you get the details for the prices in the property analyzer worksheet?

For example, bldg cost and land cost - how do you know which is which? For the condo we're looking at, I assume that the land cost is $0, right? Bldg cost would be based on an appraisal. But you can't have every single property you look at appraised, right? So do we use the MLS for this?

What about calculating insurance expenses? Do you actually get a quote from an insurance agent for every deal analysis you do? Or is there a good general rule of thumb for this?

What about just forgetting about the details and using the 50% rule of thumb?

In the case we're looking at, a conservative estimate for rental income would be $36,000/year (that's estimating 9 weeks of rental during high season and 8 weeks of rental during low season at rates quoted by the condo's real estate agent that seem to be valid based on what's on VRBO).

So expenses estimate would be $18,000 (50%) and mortgage would be $13,000 if we got our target price at auction. (MLS is $440K, starting bid is $165K, we're estimating what would happen if we got it for $200K. We know this is probably lower than their unlisted reserve price, though, so may not be realistic.) With these numbers, cash flow would be $5K per year.

When I plug in my estimates for expenses into the property analyzer spreadsheet, though, it shows a cash flow of NEGATIVE $17K per year.

The estimates I used were 30 year mortgage, 6% interest, property taxes at 2.5% of MLS-which I'm assuming would be close to the appraised value, $1000 property insurance, 30% for property management, $1000 for repairs and maintenance-it is new construction, $500/mo for utilities - electric and good cable, $1000 for accounting and legal, $279/yr for advertising on VRBO - though we wouldn't be paying this if we used PM, $700/mo HOA-quote from agent.

What are we missing here???