Frankie's Single Family Residence (SFR) Example # 1 (A Bad Deal)
Property Details
Property Type: Condo
Beds / Baths: 2 / 2
City, State: Dayton, Oh
Strategy Before Purchase
I was anxious to get into the real estate game. I knew the neighborhood was great, and the purchase price was relatively cheap. However, unfortunately, I did not take the time to run any further analysis. This would bite later.
Deal Analysis
Purchase Price / Current value: $116k / $110k
Rent: $925/mo
PITI / Current loan type and rate: $601.29/mo. The rate was originally higher as I used an 80-10-10 loan at about 6 and 8% respectively. I refinanced the property to get the rate down to 4.5%.
Condo Fees: $310.92/mo
Management: $78.63/mo
Maintenance: $50.00/mo
CAPEX: : $50.00/mo
Differential -$165.84
Current Strategy
This was a “Buy and Hold”, and I plan to keep it forever. Even though this is a bad deal, I plan to make up for the mistake with better properties and loan pay down overtime.
Lessons Learned
Running the numbers now, it’s easy to see why I should have avoided this deal. As you can see, the condo fees are killing me. These numbers even account for rents that have increased 15% over that time frame, and my PITI costs have come down due to the refinance...ouch. This property has cost me 8% annually from an Internal Rate of Return (IRR) perspective on the original investment; albeit, that was only about $25k. The ultimate lesson is to always run your numbers!!!