Analyzing first Deal

[Jacob Wutke]

Hello all, I have been listening to the Bigger Pockets podcast for several months now, just trying to soak it all in. Now that I have learned a bit I find myself analyzing any of the potential deals I see just to see if it would make sense even if it is not something I think I would be interested. I feel that working through the deals is beneficial even if for the experience and the benefit of learning the details to think through.

A family member has a co-worker with rental properties that just wants out, they are “tired of deal with bad tenants and evictions”. They have 7 properties that make up their 300K portfolio all in the 40-50K each range. All 7 properties are in Richmond MO, a town with a population of ~5.5K and flat growth. That being the case I wouldn’t expect to see much appreciation in the area, but it does seem that there may be other potential here. 6 of the properties are 2 bed one bath and the last is 1 bed one bath. Rents are in the 350-450 a month range currently, although from the looking around I did that could be very low for the area in general. In chatting with the current owner they “keep rents low to ensure occupancy”. It seems that in doing so they have probably attracted the wrong kind of tenants.

The area is a much lower income area overall with a median income of 39K, In researching it would seem it is a lower income area mainly due to the fact that it is a small town out quite a ways. It does not look like a bad or dangerous area.

Some quick math says the total monthly operating expenses should be in the ~$25-2600 range and current income in the $2800 range. Though I do feel as those leases renew the monthly income should be able to be brought up a decent bit.

• $1800 for mortgage and insurance
• $250 a month for vacancy
• $250 a month for repairs
• $250 a month for property management

In this post I am looking for high level thoughts, I do understand there is not near enough information to give the “deal” a yay or nay. In this I am just trying to learn all the things people would consider in evaluating an opportunity like this.