Follow Up: 4848 Matterhorn Deal Analysis
I received quite a few great questions about my analysis of the property above from the recent Deal Analysis: 4848 Matterhorn newsletter, but a couple of those questions were asked multiple times by multiple people, so I wanted to answer them here — in case other people have the same question(s).
I’m going to paraphrase and combine the questions, but basically what was asked most frequently is why did I use the percentages I did for Capital Expenditures, Repairs & Maintenance, Property Management, and Vacancy Rate?
In general, the numbers I used for this analysis were too low, and I should have included a property manager.
Want feedback?
Do you have a deal you’re considering? Do you want me to take a look at it for you and provide feedback? Did you complete an analysis of a property yourself and want some feedback on the analysis itself? You can submit your deals and analyses for me to review by emailing the details to robert@therobertleonard.com
If you’ve followed my content for a while, you likely know that I almost always recommend including the cost for a Property Manager in your analysis — even if you plan on self-managing.
Well, I didn’t take my own advice.
I didn’t include the cost for a Property Manager.
If I was analyzing this deal in what I would argue is the “correct way”, I would have included it.
The reason I didn’t include it is that I knew I would NOT turn over this property to a third-party property manager.
If anything, I would start my own property management business and have that company manage it. However, that’s unlikely as well, and I plan to self-manage with my business partner indefinitely. We already have other properties in this area, so we would continue doing more of the same, which is without a property manager.
For Capital Expenditures, there isn’t much of an “issue” here.
This is within my Aggressive-to-Conversative range.
I went more on the Aggressive side because I knew the property was already in good condition and likely wouldn’t need any major CAPEX any time soon.
For Repairs & Maintenance, I went a bit lower than I usually like to go.
For this analysis, I went with a figure that is below the Aggressive number for the same reason I went low with CAPEX — I knew the property was in good condition and I planned on putting about $5,000 into the property to fix any items that would be short-term Repairs & Maintenance.
For Vacancy Rate, like Repairs & Maintenance, I went a bit lower than the Aggressive number.
The reason for this is because I already own rental properties in this market and I know how the rental market is behaving.
That is not to say that it couldn’t change, but I have a good understanding of where the market is at and I run strict tenant-screening criteria, so I was comfortable with a lower vacancy rate.
Was I too aggressive with this analysis? Would you have used different numbers?
All the best,
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