Please help analyze post deals I have done recently (new investor)

[Will Murphey]

Please help me take a look at 3 deals if have recently done. I am new to this (Just started 5 months ago.)

Deal 1: 2 bedroom 1 bath. (Questionable area of town. Paid $16,500 cash ,rehabbed a bit with new carpet, new roof, and exterior paint. Total cash costs in this property is $22,400. I just rented it out last month for $661 on HUD. On MLS comps seem to be a about 30K for a like property. I have a property mananger in place paying 10%. My taxes are $387 annual and homeowners insurance is $473 annual.

Deal 2. 4 bedroom 2 bath. (Decent are of town, close to elementary school. Paid $37,500 cash ,rehabbed a bit with new carpet, new interior paint, new titled kitchen and a few cabinets, new gutted tiled bathroom, new vinal floors in other wet areas. Total cash costs in this property is $47,431. I just got it finished last week. On MLS comps seem to be a about 80K for a like property. My taxes are $1116 annual and homeowners insurance is $907 annual. I could either rent this for about $1100 a month rent or just flip it. Not sure what to do.

Deal 3. 4 bedroom 2 bath. (Decent are of town, close to a High School. Paid $52,196 cash ,rehabbing it now and hope to be done in 30 days with a total cash cost for the fixed up property at 55K. On MLS comps seem to be a about 75K for a like property. My taxes are $950 annual and homeowners insurance is $609 annual. I could either rent this for about $1100 a month rent or just flip it. Not sure what to do just like deal 2.

My main concern is this is about 75 percent of my cash that I have used up by paying cash for these properties. I have an 840 credit score but lost my job about 1.5 years ago, so my income is just limited to the rent on deal one and a small VA pension that pays my living expenses.

Please any input would be appreciated.

[Nathan Emmert]

Deal 1:

Assuming 50% expenses and no debt servicing, you're cash flow is $330 * 12 = $3,960 a year. With $22,440 into the property, your cash on cash return is 17.7%... that's pretty solid. Pulling $20k out might be a good idea. It would reduce your cash flow about $140 a month but would lower your cash into the property to $2,440. Given $190 a month cash flow (after debt servicing) * 12 years = $2,280, your Cash on Cash would go up to 93%. I'm a big believer in cash and leverage versus equity.

Deal 2:

Again, assuming 50% expenses, your cash flow would be projected at $550 * 12 = $6,600 giving you a cash on cash return of 13.9% (@ $47,531 in). That's not great, you generally want to be above 15% but it beats the pants off the stock market. If the home is worth what you imply, you could pull out $50k which would cost you $350 a month lowering your annual cash flow to $2,400 but you'd have nothing into the property and still some equity. You could leverage that $50k into another 2 or 3 down payments.

Deal 3:

Seems to be the worst @ 12% cash on cash return. Again, you pull pull out $50k and greatly improve your numbers if you wanted.

It looks like you made good choices in general. In all 3 cases you have the exit strategies of holding for cash, of leverage for more cash, or for selling for immediate cash. That's an enviable position.

As for your situation, you could still look into non-recourse loans. Generally you'll need larger down payments (40%) and pay 2% higher in interest (7% for 30 years) but they won't pull your credit or look at your income outside of the property itself that you're purchasing. Your DTI will probably make conventional things difficult though I didn't run those numbers for these 3 investments or what it would be after leveraging the investments. I believe most banks use 75% gross rents vs PITI for rental DTI.

Hope that helps.