To pull the trigger or not

[Chris P.]

I am looking at a set of two properties located next to each other. One is a 3 bed 2 bath renting for $855. the second is a duplex property with two 2/1 configurations renting for a combined rate of $1280. I found a lender that will loan 75% of the purchase price, and I could make the deal work, but It would eat up most of my capital reserves. I pulled the property tax assessments from Zillow and they are 11,800 and 16,000 respectively. I am no expert in valuations or appraisals so any help here would be great. The rental amounts are from the current leases.

$2,135.00MONTHLY INCOME

$1,694.08MONTHLY EXPENSES

$440.92MONTHLY CASHFLOW

14.08%PRO FORMA CAP

$9,853.40NOI

$22,125.00TOTAL CASH NEEDED

23.91%CASH ON CASH ROI

13.59%PURCHASE CAP RATE

ExpensesIncome50% Rule

Total operating expenses:	Mortgage expenses:
Vacancy:	$170.80	Repairs:	$213.50
CapEx:	$106.75	Electricity:	$50.00
Water & Sewer:	$162.00	Insurance:	$120.00
Management:	$213.50	P&I:	$380.20
Property Taxes:	$277.33

$72,500PURCHASE PRICE

Purchase Closing Costs	$2,000.00
Estimated Repairs	$2,000.00
Total Project Cost	$76,500.00
After Repair Value	$70,000.00

Down Payment	$18,125.00
Loan Amount	$54,375.00
Loan Points	$0.00
Amortized Over	30 years
Loan Interest Rate	7.500%
Monthly P&I	$380.20
Total Cash Needed	$22,125.00

Financial Info

2.79%2% RULE $15,625.00TOTAL INITIAL EQUITY

2.83GROSS RENT MULTIPLIER

2.16DEBT COVERAGE RATIO

Analysis Over Time

3% /yearEXPENSE INCREASE

3% /yearINCOME INCREASE

2% /yearPROPERTY VALUE INCREASE

Year 1	Year 2	Year 5	Year 10	Year 15	Year 20	Year 30
Total Annual Income	$25,620.00	$26,388.60	$28,835.54	$33,428.29	$38,752.55	$44,924.83	$60,375.21
Total Annual Expenses Operating Expenses Mortgage Payment	$20,328.97 $15,766.60 $4,562.37	$20,801.97 $16,239.60 $4,562.37	$22,307.82 $17,745.45 $4,562.37	$25,134.21 $20,571.84 $4,562.37	$28,410.77 $23,848.40 $4,562.37	$32,209.20 $27,646.83 $4,562.37	$41,717.40 $37,155.03 $4,562.37
Total Annual Cashflow	$5,291.03	$5,586.63	$6,527.71	$8,294.08	$10,341.78	$12,715.62	$18,657.81
Cash on Cash ROI	23.91%	25.25%	29.50%	37.49%	46.74%	57.47%	84.33%
Property Value	$71,400.00	$72,828.00	$77,285.66	$85,329.61	$94,210.78	$104,016.32	$126,795.31
Equity	$17,526.25	$19,494.41	$25,837.43	$38,134.84	$53,197.53	$71,986.64	$126,795.31
Loan Balance	$53,873.75	$53,333.59	$51,448.23	$47,194.77	$41,013.25	$32,029.67	$0.00
Total Profit if Sold *	-$1,449.73	$6,062.22	$30,895.02	$80,784.39	$143,073.13	$220,258.21	$432,774.81
Annualized Total Return	-6.55%	12.87%	19.10%	16.62%	14.34%	12.71%	10.60%

[Chris P.]

Ok, so after a series of setbacks I have been able to negotiate a better deal with the seller. I offered 70k with 30%down owner finance at 5% interest with a balloon at 3 years. The offer was accepted and is pending a walkthrough and financial records evaluation. While I do feel I am overpaying based on the arv value of the properties, I am comfortable with the price due to the owner finance and positive cash flow that the property generates. According to my analysis, the property should be generating just over $500 a month cash flow from all three doors.