[Calc Review] Help me analyze this deal

[Ted Klein]

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Hello Fellow BP'rs, I have found this property that I think I can get for around 60k and the area comps in like size and year built are around 108k. It appears that the area rents are able to support $1000 per mo. This would be an initial cash purchase so no hard money costs.

 I haven't did the BRRRR process  yet, so I would like to have someone look it over to see if I have the inputs correct.

The problem I see, it that the monthly cashflow is only $143.00. It shows a 265% year one COC return and a 7080% annualized total return at year one. Hearing those numbers, it seems like a killer deal, but with the low cashflow it causes some concern. Would this be a good short term deal just to do the BRRRR and then sell it or should I be looking at this as a flip? My thoughts are there isn't enough margin at 60k purchase.

Any Advise Please?? Thanks

[Ted Klein]

@John Leavelle The house is a bank owned auction property and we were able to gain access last week. The inside is in fairly good condition. I was figuring on only painting the inside and giving it a deep cleaning. It has tile and laminate floors so nothing needed there. While I know there is a reserve on the property, I do know what the listed price was on Zillow and it was bid up to $55k last week and didn't sell. So, I figure the number is somewhere pretty close to $60k.

Yes it would be a cash purchase. The $500 into the acquisition price was for the appraisal on the refinance, not sure how it ended up in there. I may be wrong, but, as far as I know, on a cash purchase there is no seasoning period. Since I have a very good relationship with my lender I have been able to close on my last two purchases in between 22-30 days. I already have did the pre-approval so this helps reduce the overall time to close.

I thought about leaving more cash in the deal to increase cash flow, but then that only exacerbates the lost opportunity cost on dead equity. I agree on sticking to a criteria, however, even with a high COCROI 259% of $143 monthly cashflow is only $21. Not hardly worth the trouble.

I did re-run the calculator leaving some more cash in the deal and only borrowing $45k and it then cash flows $280 per month with a 13.13% COCROI. It just seems to me that there is just not enough margin for the trouble. I forgot to mention, that this is also an OOS property, so it would need to meet my 15% COC criteria without leaving the extra cash in the deal. The lost opportunity cost is what I I should be trying to avoid in the BRRRR method correct?

If this property were to be a flip, it would require much more rehab thereby reducing the profit margin. Unless someone can explain it to make better sense, I am not seeing that this is a good BRRRR model at the hoped for 70% LTV I was expecting.