Real Estate Agent · San Diego, CA · Member since 2018 · 124 posts · 50 votes
Hey can someone just either fill me in.. or point me in the right direction. How can I asses wether the deal is good or bad. Someone please break it down. I understand you need to run the numbers. The way I under stand is to total up all your expenses.. then total up the annual rent brought in by tenants. And deduct the expenses from the rent and if there’s money left over.. your in the green. Soild deal assessing or am I completely off?
That seems to simple!
It is simple. The part you left off was deciding ahead of time what that resulting "number left over" needs to be at a minimum. Once you decide, don't change it...and don't rationalize your way into fudging numbers to make a close one work.
Either it works or it doesn't. The number$ don't lie. Don't argue with them...you'll lose every time.
It is simple. The part you left off was deciding ahead of time what that resulting "number left over" needs to be at a minimum. Once you decide, don't change it...and don't rationalize your way into fudging numbers to make a close one work.
Either it works or it doesn't. The number$ don't lie. Don't argue with them...you'll lose every time.
@Joe Villeneuve so say I want $500 cash flow on my property after all expenses are paid. My
Model is correct? Simply add all expenses up- deduct the rent. If I have $500 left over I’m hitting my goal?
@Joe Villeneuve so say I want $500 cash flow on my property after all expenses are paid. My
Model is correct? Simply add all expenses up- deduct the rent. If I have $500 left over I’m hitting my goal?
@Michael Junior just checking, by ”all expenses” do you mean inclusive of vacancy allowance, property management fee (whether DIY or PM), contributions if any to a capex reserve fund, etc.?
@Patrick Dittmer nope I’m glad you asked. Typically what % do you allow for vacancies? First property I’ll live in and maintain.. and could you explain the last part there not familiar with that.
@Michael Junior Yea, you should be able to call a local PM to get a sense of area vacancies, as they vary. But I believe a good ballpark fIgure for analysis is 6-8% of gross rents. Capex is capital expenses (the larger expenditures that extend the life of the asset, lIke a new roof, not just routine repairs/maintenance) (you should factor those in too). Not sure how others do it, but I plan to have, upfront, extra cash on-hand in case of emergencies (furnace goes kaput), but also factor in my analysis a little expense every month to ‘fund up’ an account from which to cover those kinds of infrequent and less predictable but substantial costs. Think some people might use a home equIty line of credit (HELOC) on their primary residence for this same purpose. Good luck, man!
@Michael Gunn I mIght have missed the mention here, but it could also be constructive to think about what your ideal tenant is (newly minted working professional, grad students, hard-working college kid, blue collar workers, etc.). Some strategies may not jive with your personality and could turn a (somewhat) passive investment into a very offputting experience. Your pick there will dictate what asset you’re looking for almost as much as other “goal factors”. I believe the pro hockey player featured as a guest on the bp ep mentioned house hacked with/rented to teammates for a time. Definitely check out that episode!