Buy and Hold Analysis

[Will N.]

Hi Everyone.

I'm new here and to investing but was hoping to get your feedback on an analysis for a property. Full disclosure this is not necessarily a property I have any intentions of putting an offer on as I am still in the learning stages - but would very much appreciate your feedback to get an idea if I'm on the right track of doing the analysis.

I've analyzed at least 300 properties over the past several months and actually put an offer on a few of the first few that I thought were good ones but fortunetly they didn't work out. I've done everything from the 1% (yes not 2%) rule to multiplying monthy rent by 84 (all of which I had heard from various soruces).

However I have been doing a lot of reading and learning since and this analysis is based off of that learning so I hope it's accurate. Thanks very much to J. Scott who's analysis spreadsheet mine is based off of.

The numbers used are entirely based off the pro forma:

Asking Price (not offer price): $233,000

Down Payment: $58,250 (25%)
Improvments: $6,000
Closing Costs: $4,500
Total Cash Invested: $68,750

Total Rent: $3,525
Gross Income (less vacancies): $3,232

Expenses: $17,804 (50.39%)
(includes 11% PM, maintenance at 10% of gross income)

NOI $20,985

Debt Service: $10,625 ($175,750 mortgage at 4.5% for 30 years)

Cash Flow (with PM): $10,360
Cash Flow (without PM): $14,627

Cash on Cash (with PM): 15.07%.
Cash on Cash (without PM): 25.59%

Cap Rate (with PM): 9.01%
Cap Rate (without PM): 10.84%

I'd like to do the management on my first few properties to learn, however my minimum criteria has to work with a PM as I will eventually get one.

My conclusion is that on paper this property is quite a good one considering its cash flow, cash on cash, and cap rate - especially when considering this is based off the asking price.

I'd love to hear your thoughts.

Thank you.

Will