Homestead analysis

[Giles Smith]

Hey guys,

Questions at the bottom, some background for why I am purchasing such a house at the beginning.

I am currently trying to buy a homestead and in need of a relatively quick move. For me this requires a 3/2 in updated, rehabbed, move-in condition.

I can do FHA on this house and put down 3.5% My loans will be at 3.9% +/- depending on when I close. I think I will go this route as the PMI will not add a significant % to the interest when compared with interest I would pay to get that 20k by other means (student loans not paid off).

I have found a house listed at 125k that is a 3/2 1000 sq. ft. ranch with nice updates (granite countertops, hardwood refinish, cherry wood cabinets, finished basement, modern bathrooms, etc.), garage, deck, and an 800 sq. ft., finished, basement. It will be a nice house for me to live in for a couple years and should make a reasonable rental property, for which I have a good niche/market to rent in, and should be able to rent at 1350 +/- 150bucks.

I anticipate getting the house for 115,000 all in w/ seller reimbursing closing costs.

@3.5% down = $4,025 down

@1400 rent/month
taxes = 2350 (previous year at 55k SEV)
insurance ~800? (quoted 450 by 8 companies for homestead taxes)
maintenance ~ 1500?
property management ~ 1400 (~10%)
vacancy ~ 1200 (~8% with good niche market of students)
Debt service w/PMI assume 4%, 30 year fixed = 590x12 = 7080

Total expenses w/ debt service = 14,330
Total yearly profit = $2470
CoCR@1500 = 86%
CoCR@1400 = 61% (pm/va values changed to reflect rental price)
CoCR@1300 = 40%
CoCR@1200 = 17%

I have two questions regarding this deal.
1) Are my estimates for expenses ballpark for your average house of this nature
2) Does this deal make sense to do in light of the fact that my investment options are somewhat restricted by my requirement for a move-in-ready-homestead?

Thanks for taking a look!