Negative ROI!?! Are my calculations off???

46 Replies

PS your smart to shop for 120k and up rentals that have gross rents at or above 1200  that gives you enough GROSS revenue to save for Cap ex which will happen..  you have to be careful with SFRs that only have gross rents lower than 700.

you may not have enough gross revenue over time to pay for that 8k roof.. or other major components that WILL need replacing or major upgrades over a 10 to 20 year hold.

Originally posted by @Langston Carr :

@Jay Hinrichs my apologies, I meant 1,000 employees.

YUP great news the exact type of jobs you want for work for C class housing  or blue collar housing !!  They built one like that in Troutdale Oregon .. that did not do much for my new construction as we are at 500k plus.. but it sure helped the apartment owners.. not nearly as many SFRs are rentals in the Portland metro area as you see out in your area.. apartments account for about 80 to 90% of all rentals.. 

Housing stock is just too expensive in most cases to make them rentals. 

 

Hi Spencer, You don't buy a house with 0.67 rental value in Memphis. I bet that's class A property. That's California number. For Memphis your target is 1.0 or 0.9

Originally posted by @C-Dell J. :

@Andrew Watson Good morning. How well do you know Macon neighborhood to neighborhood?

 I don’t know Macon as a whole very well, but I know the areas we want to invest in. Unfortunately, Macon nor any of the other towns we invest in, are very consistent across an entire neighborhood. We tend to pick streets

Originally posted by @Spencer Gracia :

Kevin,

Example: I ran numbers for a140k home with 20% down($28,000)

Avg. rent in that area went for $950

TOTAL Expenses including: $1051

-Mortgage $668 

-Utilities (Water/Trash) $40

-Vacancy $48

-Cap expenses/Repairs $200

-Property Managment $95

Am I way off on my numbers in regards to rent or expenses???

A $140k home that rents for $950 will be negative.  I don't even need to run all the numbers.   Just like when I buy an apartment building if I was to pay $140k/door for $950/rents I'd be dead.   I just paid $150k/door for an apartment building with $1,700 rents.  That's where the $ is.  Or I paid $50k/door for a building that has $700 rents. 

If you're investing OOS, you should be doing so to target a 1% property.  i.e. a $140k property should lease for $1,400 or close to it.    If you can't get closed to that 1%, no need troubling yourself on figure out what the trash bill will be -- it aint going to work out. 

I'm from WA state and without looking at the condition of your unit, I'd say..$950 is not bad for landlord.  However, I agree with many folks on this thread.  You have petty expenses that are way too high, adding to out-of-pocket costs.  Hmm..I think 1) you should either renovate the home in some shape or form to add more value to the home so you can increase the monthly rate (start with kitchen area first). 2) change your landlord policy so tenants pay for W/S/G/E- yes all utilities. 3) self-manage to reduce $95/month then you can use the amount in the end as well for your tax deduction.

Numbers don't lie nor changed.  But you can change your strategies to bring higher monetary value. 

T

Originally posted by @C-Dell J. :

@Andrew Watson. Street to street is more what I meant. But understood. I recently started buying there. It’s tough from a distance.

I couldn’t agree more. I live in Atlanta but I / we are in Macon weekly when we aren’t renovating, and more often when we are. We’re selling one of our Macon homes to someone who lives out of state and plans to use a PM to manage it.  She said she can’t get the cash flow and broad pool of renters anywhere closer.  

 

@Andrew Watson I’m just trying continue meeting more people familiar. The wholesaler deals I see seem to come from people who don’t know Macon. Good luck with your goals!

@Spencer Gracia you are getting a lot of great information from the group. I have read most if not all posts, so maybe someone else mentions this... the 1st and PRIMARY reason these numbers won't work is that it is an MLS deal. If you think you have "found a deal" on a public open-source platform... you may want to consider why no one else has purchased it. In this case, you are paying a premium, which I believe another contributor commented on. I'm not going to beat a dead horse I think you get it. Best wishes and believe me there are PLENTY of deals to be had. If you have the capital, maybe you should consider finding someone to JV with? Just a thought.

@C-Dell J. I live and invest in Macon. I love the market here, I am currently finishing a BRRRR 3/2 and will rent for $900-1000. I also have a property in Warner Robins close to the base. This whole area is just dripping with potential. Hit me up sometime if you have any questions about a specific area.

If it is a single family house, customarily the tenant will pay for the utilities fully and be responsible for repairs. 

Moreover, single family properties should not need $2,400 per year every year unless you are buying something that's terribly distressed. 

Lastly, a 10% mgmt fee is steep. And you should be able to self manage a single family. 

You might also be paying a bit too much for this house. Don't be afraid to renegotiate! 

Does anyone have some rcommendations for two things. Good solid contractors doing work in Chicago land area, one property in Douglas Park and another property in Dolton, IL. Also, a solid property management company for each.

@C-Dell J. @Andrew Watson , good day I do deals in the Macon area and I'm very familiar with number running here locally. I typically do this for a lot of "out of town investors." I see a ton of individuals not from this area attempt to wholesale or buy cash and totally have the numbers wrong. If you need assistance in this area please contact me. 478-239-5044.