Rental Property - Sect. 8 Deal Analysis… - Posted by Maxx(TX)
Posted by Maxx(TX) on July 16, 2003 at 15:36:58:
Here’s my deal of 10 units of duplexes (3 full, 4 halves). Intentions for Section 8 rentals. All but 1 are rented with lease expiring in Aug '03. And will be renewed.
Section 8 here is about 18mths wait and 5500 families in need of affordable housing. Properties go like hot cakes, max. will be 2 weeks vacancy, if I want to be pick and choose tenants.
Deal for ea unit (half): Built 1985
Asking Price $65,000
Gross Annual Rents $10,800 ($900/mth is lowest, high $1K)
5% Vacancy Rate $540
Gross Operating Income $10,260
5% Management Fee $540 (my own management co.)
10% Repairs/Reserves $1,080
Total Operating and Fixed Expenses $4,120
NOI $6,140 or $512/mth
5% down (7.0% 30yrs)
Cash Flow $100/mth
However, since I’m a realtor I get back 3% commision = $1950. My out of pocket is 2% = $1300.
ROI = $ 100 * 12/$1320 = 90%.
Where did I go wrong in my analysis?
Then my biggest hurdle is not the $$$, but the fear of acquiring over 600K in debt. I know we’ve gone through this before, but can someone nice outside help me overcome this hurdle?
My goal is to take 4 yrs acquire 24 properties for $5000 mthly cashflow. Now with this 10, I’m close to $2500 if I dont factor my own time for 5% Management fee and reserves. Only reserves that I see so far will prob. be $1500/unit on roof and minor misc. in next 4 years.