NEW! BP Podcast 022: BP Podcast 022 - Building a Marketing Machine, Spec Houses, Flipping & Wholesaling with Tucker Merrihew

Hide this

People to Know

 

From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1162 topics, 10899 posts — Last Post 06/19/13, 06:16PM

BiggerPockets Exclusive PRO Area

31 topics, 231 posts — Last Post 06/15/13, 07:02AM

New Member Introductions

6475 topics, 43038 posts — Last Post 06/19/13, 08:32PM

Real Estate Success Stories

220 topics, 3027 posts — Last Post 06/18/13, 10:19PM

BiggerPockets Real Estate Investing Summit

95 topics, 1723 posts — Last Post 05/16/13, 06:39PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

2965 topics, 24219 posts — Last Post 06/19/13, 07:41PM

Renters

333 topics, 2861 posts — Last Post 06/19/13, 08:59PM

Get Foreclosure Help - Help Stop Foreclosure Forum

268 topics, 2115 posts — Last Post 06/19/13, 09:25AM

Home Owner Association (HOA) Issues & Problems Forum

161 topics, 1082 posts — Last Post 06/17/13, 07:25PM

Do it Yourself

410 topics, 3748 posts — Last Post 06/19/13, 04:05PM

Reviews & Feedback

Real Estate Deal Analysis and Advice

2221 topics, 17249 posts — Last Post 06/19/13, 08:26PM

Real Estate Guru, Book & Course Reviews and Discussions

882 topics, 8672 posts — Last Post 06/19/13, 07:46PM

Ask About A Real Estate Company

548 topics, 5610 posts — Last Post 06/19/13, 06:46PM

Real Estate Investing

Real Estate Strategies

Wholesaling

3897 topics, 31031 posts — Last Post 06/19/13, 08:18PM

Rehabbing and House Flipping

2449 topics, 22739 posts — Last Post 06/19/13, 04:36PM

Real Estate Development & New Home Construction

405 topics, 2943 posts — Last Post 06/19/13, 08:20AM

Innovative Strategies

526 topics, 4235 posts — Last Post 06/19/13, 10:45AM

Tax Liens, Notes, Paper, & Cash Flows Discussion

598 topics, 4410 posts — Last Post 06/19/13, 12:40PM

Rent to Own a.k.a. Lease Purchase, Lease Options

488 topics, 3390 posts — Last Post 06/19/13, 10:09AM

1031 Exchanges

89 topics, 616 posts — Last Post 06/19/13, 09:11AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1383 topics, 9063 posts — Last Post 06/19/13, 11:19AM

HUD, VA, and Tax Sales

278 topics, 1809 posts — Last Post 06/12/13, 09:56AM

REOs

1066 topics, 9265 posts — Last Post 06/19/13, 05:29PM

Short Sales

1395 topics, 11908 posts — Last Post 06/17/13, 10:49AM

Landlord & Tenant Forums

Landlord & Rental Property Questions

4929 topics, 46342 posts — Last Post 06/19/13, 08:59PM

Mobile Homes & Mobile Home Park Investing

495 topics, 3897 posts — Last Post 06/19/13, 05:52AM

Investor Basics

Starting Out

5504 topics, 42740 posts — Last Post 06/19/13, 07:52PM

Investor Psychology

345 topics, 5044 posts — Last Post 06/18/13, 07:44AM

General Real Estate Investing

3622 topics, 28022 posts — Last Post 06/19/13, 07:12PM

Real Estate Investor Marketing

1203 topics, 9740 posts — Last Post 06/19/13, 06:18PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1158 topics, 7288 posts — Last Post 06/19/13, 06:54PM

Multi-Family and Apartment Investing

583 topics, 4985 posts — Last Post 06/19/13, 06:59PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

475 topics, 3898 posts — Last Post 06/19/13, 02:34PM

Business Basics

Goals, Business Plans & Entities

575 topics, 5363 posts — Last Post 06/19/13, 07:32AM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2027 topics, 14345 posts — Last Post 06/19/13, 08:24PM

Credit & Credit Repair

225 topics, 1839 posts — Last Post 06/18/13, 07:43PM

Property Insurance

209 topics, 1339 posts — Last Post 06/19/13, 07:24AM

Bankruptcy

25 topics, 138 posts — Last Post 03/22/13, 08:22PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

1927 topics, 12994 posts — Last Post 06/19/13, 08:43PM

Creative Real Estate Financing

859 topics, 6047 posts — Last Post 06/16/13, 02:22PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

813 topics, 5147 posts — Last Post 06/19/13, 07:24PM

Bankers, Lenders, and Mortgage Brokers

376 topics, 1515 posts — Last Post 06/19/13, 08:34PM

Contractors

160 topics, 884 posts — Last Post 06/19/13, 10:11AM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

983 topics, 5626 posts — Last Post 06/19/13, 06:49PM

Americans & International Real Estate

149 topics, 540 posts — Last Post 05/17/13, 03:21PM

Foreigners Buying in the USA

47 topics, 296 posts — Last Post 06/02/13, 01:20PM

Canadian Real Estate

33 topics, 155 posts — Last Post 04/28/13, 07:59AM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

11732 topics, 45067 posts — Last Post 06/19/13, 06:51PM

Off-Topic

Off Topic

Off-Topic

2594 topics, 30480 posts — Last Post 06/18/13, 09:35PM

Housing News & Real Estate Market

772 topics, 7258 posts — Last Post 06/17/13, 11:39AM

BiggerPockets Resources

Forums » Real Estate Deal Analysis and Advice » A couple of questions regarding pro forma analysis

A couple of questions regarding pro forma analysis

10 posts by 6 users

Signup

· Boise, Idaho


Hi guys, longtime bigger pockets lurker here.

I am looking to buy a 3-4 unit property in my hometown to buy and hold. A couple questions for everyone on building good pro forma analysis before I get in touch with a seller.

1) How do you determine a vacancy factor for a 3-4 unit property?
2) How much should I put in the cash flow analysis for repairs/maintenance?
3) I plan on living in one of the units, from a tax perspective is PMI a deductible expense?
4) In my analysis I have a vacancy loss, management fees, replacement reserves (repairs and maintenance), property taxes, insurance, PMI, and utilities. Any other expenses I need to be including in my analysis?

Thanks for any insight, looking forward to being a part of the community.


Real Estate Investor · Springfield, Missouri


Maintenance depends on condition 5 to 10% o gross rents should do.
Tag 1/12th each month or 1/4 every 3 months, consider what could go wrong.

PMI is not tax deductible individually but is an expense in business.

Consider 10% vacancy, estimate when it will be leased for the first time and put month in at the end it's a guess so you can delay income well, lots of ways to play what if.

Any mortgage payments with that PMI? :)


Residential Landlord · Lima, Ohio


The vacancy factor is a function of the market. Furthermore, even in the same city vacancy can swing substantially from one local to another. Unfortunately you will need to do some research. Hopefully nothing over 10%.

Are you handy? Do you plan to auger toilets or call someone to do it? Better safe than sorry...

Wouldn't you agree @Bill Gulley Is a funny guy!

Small_finished_ad_8Ben Leybovich, JustAskBenWhy.com
E-Mail: ben@justaskbenwhy.com
Telephone: 1.888.508.9643
Website: http://www.JustAskBenWhy.com
Ben Leybovich, Source Investments, LLC http://www.JustAskBenWhy.com


Real Estate Investor · Springfield, Missouri


Well, just thought there might be...LOL

BTW, welcome to BP Cam!

Hey, 8,500 posts I'm wearing out the second lap top and one notebook bit the dust! :)


· Boise, Idaho


Originally posted by Ben Leybovich:
The vacancy factor is a function of the market. Furthermore, even in the same city vacancy can swing substantially from one local to another. Unfortunately you will need to do some research. Hopefully nothing over 10%.

I understand that I need to do some research, I was just curious where I can conduct said research. I am having a hard time tracking down any reliable data on vacancy for anything other than apartments. Maybe that is the best data I can get my hands on?

In the meantime I will plug in 10% as a nice conservative placeholder.

Thanks so much for your guys' responses!


Real Estate Investor · Wheat Ridge, Colorado


IMHO, its dangerous to try to do a super detailed analysis. The temptation is to cut back on each slice until you're underestimating the expenses. Read the sticky thread in the landlording forum about the 50% rule. That rule of thumb says that 50% of your gross scheduled rents will go toward expenses, vacancy, and capital. The remaining 50% is used to pay your P&I payment (taxes and insurance are in the first chunk) and give you some profit.

Now, property management is a big chunk of that 50%. About 14%, in my estimation. That's 10% off the top plus half a month, once a year to fill vacancies. So, if you self manage, you can reduce that 50% to 36%. That assume you're willing and able to do the management.

Having that rough estimate, look for anything that might make it higher. Older property, landlord paid utilities, rough area with lots of turnover, etc.

As far as accounting for your self, I would estimate the expenses based on full occupancy. Now, you will be, in some ways, a better tenant than average. But you may tend to spend more on taking care of your own unit. Then, subtract off your chunk of the rent. So, if it was fully occupied and you're self managing, I'd estimate cash flow as:

cash flow = (rent) - (rent * 36%) - P&I

Rent here means gross scheduled market rent for all units.

With you occupying one unit, I'd use:

cash flow = (rent) - (rent * 36%) - P&I - (rent for your unit)

Jon Holdman, Flying Phoenix LLC


Real Estate Investor · Springfield, Missouri


All well and good, but it depends on your market. Ask around with other investors, at REI meetings if you have them, ask lenders what they see.

If you applied rules of thumb, like 2% in my market, you'd never buy reantals. You need to nail it down, look at the tax angles, hopeful appreciation, if you buy crappy properties today and you don't improve them, you'll have nothing more than a job, IMO.

Look to your market, not ratios to buy into. Good luck...


· Boise, Idaho


Originally posted by Jon Holdman:
...

Originally posted by Bill Gulley:
...

Thank you both so much for the great responses. Much appreciated.


Real Estate Investor · Portland, Oregon


Looks like you have a strong rental market: partial article from Boiseinvestmentproperties.net

Tony A. Drost
http://www.frpmrentals.com/
http://www.boiseinvestmentproperties.net//
First Rate Property Management, Inc
Boise, ID

Market Update On Rents And Vacancy

Below are the results of the SW Idaho Chapter of the National Association of Residential Property Managers 4th quarter survey. It is important to know that NARPM members typically manage single family homes and small multi-family dwellings. So this data does not include large apartment complexes that usually have many amenities, such as pools, clubhouses, workout facilities, computer center, etc. Because of those amenities, those properties typically rent for much more.

VACANCY RATES:
Below are a line graph showing vacancy for single family home rentals and multi-family rentals. As you can see, overall rental vacancy was just about 3% at the end of 2012. It was interesting to see that multi-family rental vacancy, over 4%, was over twice that of single family homes, at about 2%. Why? Well, for certain, the inventory or supply of multi-family dwelling is quite a bit more than Single family home rentals. So that could be a factor. Another factor could be that demand for single family rental homes has improved. As we have mentioned in past posts, we are seeing well established people choosing to rent instead of buying. Lastly, single family home rental tenants tend to stay longer and being winter, they are choosing to stay put for now.


Real Estate Coach · Katy, Texas


Question for you guys - when talking about a 3 or 4 unit property, how much does the market vacancy really affect that one property? Realistically speaking, Cam will probably devoting a lot more labor/time per unit than the average multifamily unit, and assuming some good marketing, I can't imagine it would follow market vacancy rates unless his property has issues.




Sign up