Rental analysis where am I wrong

[Mikhail Katz]

Hey guys, I am new here after BP webinar trying to analyze some properties for practice.

So I found this duplex on Realtor, it is currently PENDING so not really going to do anything with this just wanted some feedback.

So what we have here is a duplex in Indianapolis, IN, with two 1bed/1 bath units asking price is $89,900.

Estimated rent for 1 bed in the area according to Rentometer is about $650, but I conservatively put $600 in my calculations.

House looks OK but I put $5000 in a fixing budget.

So, after all, we got $285 in cashflow monthly with about 13% cash on cash which is looks pretty good to me for a random listing from realtor.com which is also been there for 175 days now.

So my ultimate question is what do I get wrong? Is it a hood/warzone neighboorhood? But school ratings looks more or less okay.

Chances it requires much more money to invest in fixing? Possibly.

Anything else? Thanks!

[Sunitha Rao]

Hi Mikhail,

I run my numbers pretty conservatively but here are my thoughts:

- Vacancy: I like to reserve about one months worth of rent for vacancy, which would increase that numbers

- Repairs/Capex: I like to budget for 7-8% for each. Some may think that high, but I'd rather pass on properties that are borderline in order to find properties that will definitely make me money, even if costs are higher than anticipated. My investable capital is a limited resource, whereas investment properties (with enough time, researching, and patience) is less so.

- Management - Don't forget lease up/renewal fees...Lease ups can cost up to one months rent, with renewals being less costly.

- Insurance - this cost will depend on the property but likely that it will cost more than $20/month by at least 2x.

- Water/ Sewer - Should be able to charge back to tenants.

- Interest rate - Feds raised rates again, so might be tough to find a non owner occupied (assumed due to your location) conventional loan @ 5%.

- Confirm property taxes on the county website.

Feel free to PM me if you have questions.  Good luck!