[Calc Review] Help me analyze this deal

[Joshua Feasel]

View report

*This link comes directly from our calculators, based on information input by the member who posted.

Hello, I found a off market deal and ran some analysis. House is 990 1 bedroom 1 bath and was built in 1930s.  rent will be $700 starting 6/1/2018. I looked it up and it is a bit higher than average in the area. therefore I put down average rent $500. tax is $569 in 2017. 

Please let me know what you think. 

[Andrew Kerr]

@Joshua Feasel Thanks. The challenge with such a low rent is, that even taking 10% of rents for maintenance & capex, you can still find yourself under water. 

As an example, if you have to replace a fridge, even a more economical one around $600, that would eat up a whole year of maintenance. Or a single service call from a plumber, electrician or HVAC tech could run you $200-$300.  There goes a huge chunk of the year in maintenance.

From the capex side, how many months do you need to save to repair the roof? If the roof would cost say $4k, a simple roof, you are 80 months. Then what about a new HVAC system, new windows, new siding, etc. Then figure in having to update units every 5-7 years with new carpet, paint, etc. 

Hopefully this helps drive home the idea. On deals like this, the way to make money is to sell before you have to spend anything on capex, and also hope you have several maintenance free years.