[Calc Review] Help me analyze this deal

[Anthony Heatley]

View report

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

Good evening everybody,

I watched the Newbie webinar today and Brandon mentioned that the single most important skill that needs to be mastered is deal analysis. I took advantage of the discount code and upgraded to pro so I could practice using the calculators as much as I need to. 

I found a foreclosed home that interested me and decided to run the numbers on it. I had to edit the report 6 or 7 times; playing around with the numbers and learning how properly enter all the data.

A realtor that I met on BP (don't know if I should name drop here) advised me that the ARV would be about 130K and that it would rent for about $1,100. 70% of 130,000 is 91,000. My repair estimate number ($28,000) was completely arbitrary, assuming that the house didn't need any extreme repairs. I have no idea what an average rehab costs but I've heard Brandon Turner mention a range of 20K-50K throughout various YT videos and podcasts.

(80000 hard money loan)

-------------------------------------

91000 refi loan amount

-28000 repair costs

-------------------------------------

63000 max purchase price

58000 starting offer

Once I found this number, I plugged in what I thought to be all the necessary numbers and generated the report. I don’t remember what all the initial numbers were anymore, but I’m pretty sure it cashflowed about $24 after refinancing, and after accounting for the 50% rule. But as I was going through each section of the report, I couldn’t make sense of certain numbers. As I worked backwards, I realized that I didn’t understand how to enter the info properly to describe the terms of the hard money loan. Then I realized that I had to get actual example numbers for a hard money loan. So I found one on BP and used their calculator to see what a loan would cost, then I figured out how to properly enter the data in the calculator. Needless to say, the numbers changed. Once I saw that all the necessary numbers were in place and they made sense. I decided to see what purchase price would make this a better deal. I worked my way down to $52,000.

Following the 50% rule, the property would cash flow $62/month and we’d have $0.00 in the deal after refinancing. I realized that during the initial rental period (12 months before refinancing) that property would be cashflowing negatively ($152/month). So my question here is, is this normal? Or is this an indicator of a not so good deal? Another thing I don’t completely understand is the holding cost. How and why is it $3,127.60?

I’d appreciate any comments or corrections on my analysis. I’m just trying to get a grasp on each concept of the process and calculator.