Property Analysis Help!!

[Bradley Russell]

I suppose after listening to hundreds of hours of Mr. Turner and Mr. Greene's voices on Youtube videos, I probably should make an effort to start posting in the forums. 

By day I am practicing reviewing deals, and by night I am house hacking. If working exactly 99,000,000 hours a week fixing up my basement doesn't kill me, I am hoping to purchase a second cash flowing property. By the end of the month I will have my student loan paid off. After I get renters in my home, my total monthly expenses should be nothing more than the cost of groceries and gas. After improving my debt-to-income ratios and getting enough money for another down payment, I hope to find some sort of duplex. I guess because they have better cash flow and cap rates than single family homes?

The Property

The Details

Property type: Two duplexes, a single 2/1 and three 1/1.

Listing Price: $160,000 + 150,000 for a total of $310,000.

Rent rates: Based on the rent rate from rent.com the cheapest 2/1 in this city is renting for $995, and the cheapest 1/1 is $650 which brings rents to $2,945 assuming full occupancy. After I throw in some numbers into the Zillow mortgage calculator. It looks like my expenses are $2,108 a month.

Next I put in an additional 30% for Vacancy, Property management, and Capital expenditures it looks like my total expenditures are sitting at $2,740.40 meaning my cash flow is $204.60 per month.

The Good News

It seems like it is a growing city. 

The property has an 8.9% cap rate... assuming my google searches for 'how to calculate operating income' is correct. $7,588.80/$35,340.00 = 21%

The median household income would be one third of the rent.

The price per square foot is below average at $67 where the average is $162 according to Zillow.

Zillow seems to think there is some built-in-equity

The Bad news

As the median home value is higher than these two duplexes it wouldn't be renters first choice in an economic down turn seeing as there may be cheaper alternatives.

The crime rate seems to be a little high

The schools are subpar

The place was built in 1886, and is being sold as-is.... It looks less than ideal. 

I have no idea how to calculate the ARV on this property. I have heard horror stories that 100+ year old properties are like gum on the bottom of your shoe that never goes away. Should I calculate for more monthly repairs than just 10%? Would this be a good property to BRRR?

What you would make of my analysis? Would you buy this property? Any pointers would be greatly appreciated!

[Account Closed]

I think your numbers are a bit low on how much you expect to charge for rent in that area. Crime rates are pretty extreme in WV/South Ogden, but you're right where it turns into a nicer area. I don't think you'd have a problem charging a bit more for rent due to the demand in our current economy, as well as considering that public transit in Utah will be free for the next several years offering many people new opportunities to commute. That being said, the numbers look great to me, I'd make an offer... as long as the properties seem to be in good shape. There are lots of variables here, but you'll be hard pressed to find another deal like that in the mid/north Ogden area again anytime soon.