[Calc Review] Help me analyze this deal

[Kristin Cooper]

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370k purchase price for 3k monthly income with a nonconforming/alternative rental strategy is too low of a yield, IMHO. 

The financing terms seem a bit off as well. I've never seen 20% down on 3.75% on a 30 year fixed product. You're usually looking at 25% down on a fannie/freddie rental property loan over 30 years with a 5ish% rate, or a commercial loan with 20% down and 3.75 on a 25 year / 5 year balloon product. The commercial route would not approve this property for financing due to the low cash flow- their debt coverage requirements would not be met. 

Also, are you sure your insurance would be $100/mo for a property with this intended use? Is management still going to be 8% for this type of rental strategy? You also haven't included any owner paid utilities, and I imagine you would be paying them for this type of property since submetering or RUBS programs can't be implemented in a big shared house. 

I don't think building an in law quarter will return too much because of high cost of construction- and I think you're exposing yourself to a good amount of risk by doing so because project cost usually runs high, and by the time you're finished the market may be softening creating an instant equity void. 

 If you're committed to the group home approach, I'd seek something out that has opportunity for more beds at a lower price if you're confined to $500/rent per bed. 

TOTALLY not trying to be negative here- just drawing attention to every detail I could spot at a glance in hopes of helping! Remember, we're in a peak market. That means you should be shooting for even higher cash flow standards than usual, because it's unlikely you're making much money in appreciation in the near term!