@Mark Collins Congrats on your last investment success/profit!
In regards to your analysis, the first few things I'd say, they're relatively minor, but still impact the amount of cash needed for the deal. It seems like your closing costs and repair costs are a bit low. Closing costs vary from lender to lender and from location to location, so it is possible that your number is accurate, it just seems low to me on the surface. $1,000 for repairs also seems a bit low. Even for properties in great condition, there are likely things that need to be fixed before you buy, or at least shortly after you purchase. $1,000 goes quickly, so I personally would plan for a bit more than that.
I also noticed your down payment is 20%. That is definitely possible, but I'd just confirm that your lender allows that. I am finding more and more lenders are requiring 25%. Not all, but many.
The overall cash flow is acceptable, but not great. At just $157 per unit, it is above @Brandon Turner 's minimum of $100, but I personally prefer at least $200 per unit. As a result of this, the cash on cash ROI is a bit low for me, too. My target is 30%, and my minimum is 20%. The same goes for the cap rate.
Your vacancy number of 5% is also a bit low to me. I prefer to use at least 8% (one month per year). This may be conservative, but I'd rather be pleasantly surprised when vacancy is lower than I expected. If you decide to increase your vacancy cost, that is going to reduce your already low cash flow/ROI.
However, I think your CAPEX and Repairs are a bit high. I usually look at about 15% for both of those combined. Usually a 10/5 split. If you know this property will need above average capex and repairs, I'd keep your numbers. As I mentioned, I don't mind being on the conservative side. But, it's a place you might be able to look at to increase cash flow.
Also, is this a long-distance investment for you? If not, have you considered managing it yourself? That alone could add nearly 50% more to your monthly cash flow. If you have no interest in managing the property, or can't, I think your property management fee estimate is low at just 6%. Usually they are closer to 8-10%. If you have a confirmed, quality property manager at 6%, leave it. If not, I'd do a bit more research.
Also, based on my research of the area, your estimated total monthly rent of $5,100 seems high to me. I'm getting closer to $4,400 (, and that's even being a bit optimistic. Conservatively, I'm closer to $4,085. (3x $995, 1x 1,100)
All of that being said, I LOVE the number of bedrooms. It's a big property with a lot of bedrooms - that's good for rents. Also, it has been on the market 110 days - don't be afraid to make an offer lower than asking where the numbers make more sense. Taking advantage of the 1031 exchange is great, of course, but don't do a bad deal just to do a deal.
Overall, I actually think this is a decent/good deal. I wouldn't say it's GREAT, but it's certainly an interesting/good deal. If you could talk down the price - even better.
Using my personal spreadsheet, here is how I would analyze this deal:
Hope this helps.
Robert Leonard
