I'd recommend using the BP tools to help calculate that and if you should buy. (The rule of thumb I've been seeing is minimum $100 per unit cash flow and at least 12% cash on cash...just so you know what to look for to decide if it's a good deal.) They are pretty comprehensive and include things we might not think of like insurance and taxes (which I don't see included here). Your cash flow of $60 doesn't leave a lot of margin for error. To be safe, I think you should use the tool. Good luck!
@Byran Parson this is not a good deal. I will assume you are new, so I will try not to sound like a jerk. Don't Answer, but just ask yourself a few questions.
Do you think it is a good idea to invest $12,500 in hopes of getting $60 per month?
Will it actually rent for $735?
What if the renter doesn't pay? Can you afford to carry the cost of the property if vacant?
$60 per month would make you $600 in 10 months. Then the hot water heater goes out and it costs $700 to replace.
Please be aware that even if you made $100 per month of cash flow, you will never make any money from one house using this method. $100 per door works if you have 100 units and maybe even 50 units, but never just one. You need more cash flow Sir.
@Byran Parson I failed to mention that your 3% appreciation projection is unreliable. I would suggest that you do not use appreciation to determine if you should buy a property. Appreciation does happen and will probably happen over a long period of time, but property can also go down in value 3%. If you get appreciation, great, but don't count on it.
Hi Bryan -
I agree with Jody & Anthony, you need to dig deeper into the operating expenses. If your cash flowing $60 a month with only the factors you mentioned, keep looking.
Remember to also include management fees when factoring operating expenses 10-12%?of gross monthly rent assuming this is your only rental).
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