Emerald Isle, NC · Member since 2025 · 5 posts · 6 votes
So I’m a bit frustrated trying to find my first deal. I’m looking for a mid-term rental or fix and flip in my area but I just can’t seem to get the numbers to work out. I feel like I’ve found a couple of good deals where the numbers SHOULD have worked out but my calculators are telling me different. Am I doing something wrong or have I just not found a good enough deal? Here is an example of a deal I looked at the other day that I feel like it SHOULD have worked out:
Purchase Price: $150,000
Down Payment: $37,500 (standard DSCR 30-year fixed rate)
NOI: $935.07/mo (Rental Income less Vacancy and Monthly Expenses, Taxes & Insurance)
Debt Service: $748.47/mo
Cash Flow: $186.60/mo
COC Return: 2.43%
I have been shooting for a COC Return of at least 8% and just can't seem to get the numbers to work. Any words of wisdom or advice would be appreciated!
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
1y
It's tough in all markets. The killer with this one is putting 50K on the rehab and the rent being $1,600. If rent was 1% of the purchase price numbers would be better. Doing a true BRRR might be better but more moving parts.
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
1y
It's tough in all markets. The killer with this one is putting 50K on the rehab and the rent being $1,600. If rent was 1% of the purchase price numbers would be better. Doing a true BRRR might be better but more moving parts.
Emerald Isle, NC · Member since 2025 · 5 posts · 6 votes
1y
So it’s not as much of an issue with the numbers as it is the deal? I guess that makes me feel a little bit better. I’ll just keep my nose to the grind stone and keep hunting for a deal. Thanks for your reply!
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y
A couple things stand out:
- Does your monthly debt service figure include the principal component as well, because if so, that needs to be accounted for. - Closing costs are likely to be higher - DSCR loans cannot be used for distressed properties; it looks like you have the order reversed; you will need to rehab the property first, then get a DSCR loan after
Finally, the returns in rental real estate are not solely from the monthly cashflow. It's a combination of any free cash flow each month, plus the principal paydown on the debt, plus the appreciation that occurs over time. Real estate is a tax-advantaged leverage play. Looking at an annual measure of return for a single year on a rental property isnt really giving you the full picture. I recommend using IRR over a 5, 7, or 10yr timeframe to better understand and measure your return. You will need to account for transaction costs at the presumed exit as well as any tax effects to get an accurate picture that can be compared to other investment returns.
1) You state you want to MTR, but the $1600 in rent appears to be LTR amount?
2) Property taxes: are these current amounts? How much will they change after you buy?
3) What Class of proeprty is this? You're using 6% for Vacancy & MNT which should only be done with Class A properties (in our experience).
4) No one really uses Cap-Ex for SFR.
5) Where did you come up with the $150k purchase price? - Newbies always get this wrong! You don't offer what the seller is asking, you offer what amount makes your numbers work! Many will say no, someone will eventually say yes. Yes, THIS WILL TAKE TIME & EFFORT!
Specialist · Member since 2025 · 483 posts · 270 votes
1y
Mitch, you're not crazy—your calc is doing its job. The deal's just tight for 8% COC with that much cash in. Big cash in + modest cash out = crushed returns, and your ARV spread looks thin.
Quick ways to pressure test:
Verify ARV with 3 comps—if it doesn't stretch, move on.
Price both LTR and legit MTR (net after cleaning, utilities, vacancy). If MTR doesn’t clearly beat $1,600 LTR, underwrite LTR only.
Trim rehab to true “needs vs wants.” If budget won’t cut, deal won’t work.
Renegotiate or change capital stack (private/interest-only, then refi) to reduce cash left in.
Decide your priority: pull most cash back or steady cash flow. At this ARV/price, you probably can't have both.
Lender · Asheville, NC · Member since 2020 · 463 posts · 507 votes
1y
Hi @Mitchell McGuinnis. There's already a ton of great feedback here, so I'll try not to duplicate.
1. Regarding the MTR approach: a. Be sure there’s enough demand in the specific market. b. Add upfront furnishings to your expenses. And to be safe, multiply whatever you come up with by 1.25. c. Add a monthly expense for replacing furnishings. These items won't last forever. They're not assets or improvements. And unlike STR, you won't have frequent opportunities to clean and maintain the furnishings. d. Add a monthly expense for whatever utilities you’ll provide. Many or most of us in MTR cover all the utilities and provide Wi-Fi as well. e. Be prepared for turns more frequently with MTR verses LTR, meaning gaps more often. On the other hand, with MTR you have less damage to deal with, because you’re providing all the stuff, because the tenant isn’t moving their stuff in and out, etc. And, my gaps seem to be shorter with MTR compared to LTR, meaning an average of just a week or two most of the time. f. Be sure there’ll be enough additional income to go MTR instead of LTR, and to pay back the initial investment in furnishings quickly. g. Consider that most MTR applicants only need 1-2 bedrooms and thus tend to not want to pay much more for 3 or 4 bedrooms. And some of them won’t even consider looking at homes that large. h. Consider that more often than not MTR applicants have a dog. By allowing dogs you’ll stand out from most of your competition, many of which are struggling STR owners, but you’ll need to take some precautions (ie, language in your lease, pet deposits, declining certain types of dogs, providing pet covers for furniture and requiring them to remain in place, perhaps fencing in a small area of the yard, etc.) 2. While closing costs themselves might be $4,500, you should also account for the following: a. Prepaying a year of insurance ($2,000 in your estimates) b. Prefunding your escrow account for sake of the next tax bill (likely a few months or $440 if you close soon and the county is the type that says it’s due by early January) c. Prefunding your escrow account for sake of your next insurance renewal (ie, likely 3 months or $500) 3. DSCR programs often disallow the borrower to waive escrows, meaning to pay tax and insurance bills on their own. Thus you should probably account for 1/12 of each annual amount in your monthly expenses. 4. If your rehab relates only to improving the home, you should be fine for DSCR. If the home isn’t fully habitable or functional, or there are other glaring concerns, DSCR won’t work. You’ll instead need to buy it with cash or private money, rehab, and then use DSCR as a cash-out. 5. Judging by the purchase price, it sounds like you might be buying in a rather rural area, at least by the appraiser’s judgement. They have to label the home urban, suburban, or rural. And while some of us offer DSCR for rural properties, many DSCR lenders don’t. Thus I would check into that before you get too far. 6. If you’ll pay interest on any of the cash investment, that needs to be accounted for as well. 7. Another critical question for me, if I were you, would be this. How much appreciation will there likely be for the particular market and property in the next few years? If it’ll likely be minimal, I wouldn’t bother with it unless the cashflow was going to be very healthy.
So I’m a bit frustrated trying to find my first deal. I’m looking for a mid-term rental or fix and flip in my area but I just can’t seem to get the numbers to work out. I feel like I’ve found a couple of good deals where the numbers SHOULD have worked out but my calculators are telling me different. Am I doing something wrong or have I just not found a good enough deal? Here is an example of a deal I looked at the other day that I feel like it SHOULD have worked out:
Purchase Price: $150,000
Down Payment: $37,500 (standard DSCR 30-year fixed rate)
NOI: $935.07/mo (Rental Income less Vacancy and Monthly Expenses, Taxes & Insurance)
Debt Service: $748.47/mo
Cash Flow: $186.60/mo
COC Return: 2.43%
I have been shooting for a COC Return of at least 8% and just can't seem to get the numbers to work. Any words of wisdom or advice would be appreciated!
Mitch
The first thing you're doing wrong, is basing your deal quality on a percentage. Base it on a minimum cash flow, and minimum recovery of your cash in. Base the cash recovery only on hard costs, not potential costs. Take your annual positive CF, and subtract your annual mortgage payment, insurance and taxes from it. Take that number, and divide it into the cash you put in at the start. That tells you how long it will take to recover your cash in. Keep in mind, your cost is your cash...that's it.
Realtor · OH · Member since 2026 · 122 posts · 77 votes
7mo
Your math looks correct—this is just how today's market works. With a $150K purchase + $50K rehab, CoC naturally drops. To hit 8%, you'd need lower purchase, lower rehab, higher rent, or a mix. Don't force deals—let the numbers guide you, and focus on properties where rehab + ARV actually supports your target returns.
Lender · Boston, MA · Member since 2021 · 125 posts · 64 votes
7mo
Mitch, it depends on your goal. In that scenario a fix and flip doesn’t work but if you’re going to hold it it might, again just depends on the goal. The important thing is you’re getting experience analyzing deals and running the numbers. There are a zillion deals out there, just keep working on getting leads and one will eventually hit.
Investor · Charlotte, NC · Member since 2026 · 6 posts · 8 votes
6mo
Hey Mitch! Your numbers are right — the deal just doesn't work. The core issue is $50K rehab on a property that only rents for $1,600. The market isn't rewarding you for that work. To hit 8% COC you'd need rents around $2,100+ or get your total cash in down to ~$55-60K. A few thoughts: (1) Heavy rehab deals work better as a flip or BRRRR, not a straight buy-and-hold. (2) Look for cosmetically ugly deals with no structural issues — bad paint, dated fixtures — not full gut jobs. (3) In today's market with DSCR rates where they are, 8% COC is genuinely hard to find. You're not doing the math wrong, you just haven't found the right deal yet. Keep running the numbers honestly, most beginners don't, and you're already ahead because of it, AND most importantly maintain an abundance mindset. There are deals to be found, what a gift its so hard, that means the lazy people won't find them.
