[Calc Review] Help me analyze this deal

[Jeffrey Grieshop]

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*This link comes directly from our calculators, based on information input by the member who posted.

Well, just running some different scenarios for a loan for a 2 unit. No skin in the game yet, so I am seeking some help on this simulation. On this particular report, I chose to go with the lowest interest rate offered by one particular lender, 2.5%(buy down with points I guess), 15-year loan. I was intrigued by how this rate differs from something more traditional (~4%) when looking at "analysis over time." 

From a quick observation, Coc is 4.27% at the top of the report, somewhat lame. If the only variable we changed in our deal were the loan variables from 2.5% and 15 years to 3.125% and 30 years, our Coc at the top of the report is 10.97% ( i know you can't see this but it's right), much better.

This simply has me now thinking about my exit strategy. I've always planned on buying something that I can be proud of and that cash flows consistently. Along with that, I somewhat want to "set it and forget it." I don't want to go wheeling and dealing properties, I want to find ones that perform and I want to hold them for a long duration of time (minimum of 18 years).

With that said, my "analysis over time" becomes quite important, right? Therefore I have some vague questions.

Let's look at the annualized returns. Are those cumulative numbers, as in, all the years totaled averaged that return? Or, is it specifically for that given year? For instance, in my report, the highest annualized return is 15% in year 5. Is it then, theoretically speaking, correct to sell in year 5? In both loan scenarios, my best-annualized return is in year 5.

Another thing I found interesting is simply when and where you make your money. On the 15-year mortgage (the one in the report, that is paid in 15 years) if we sell in 30 years, we make $535,260 total profit. If we sell that same property in 30 years but on the 30-year, 3.125% rate we make a total profit of $497,000. 30 years down the road and $38k richer via method A but the Coc at the top of the report is only 4.27%(our report) for this one opposed to 10.97%(the one you can't see) Coc return for option B.

Let's look at one more metric that stuck out to me, that is CoC return for year 30. the 15 year/2.5 loan(the report) at year 30 generates us with a 41% Coc return, which seems like an astounding number to me even though I probably couldn't fully explain what is happening. On the 30-year, 3.125% loan we get Coc return of 29% in year 30. that is a 12% difference in year 30 for using a different loan option.

So, to sum up some of this, it has me thinking in timeframes, that has to be a large part of the plan, correct? If I am thinking about the long game, not entirely worried about maximizing cash flow now, I want to milk the cow for two decades, which numbers should be getting my attention? Those numbers in particular(maybe I'm missing something) show that playing the long game can lead to greater profits. However, as I stated maybe I am missing something, I am tying up a lot more capital when buying down points and "playing the long game" which hinders my chances of getting into the next deal and making money in it. Man, so many variables. 

If anyone wants to chime in I would greatly appreciate it. This deal probably does not look to good on paper. As I showed, a different loan structure can lead to a lot of different outcomes.

The property itself is in good condition. I don't foresee any sudden surprises. The miscellaneous expense is what I am allocating for reserves. A tenant mows the lawn, I plan on self-managing.