Numbers don't make sense (even with huge obvious profit margin)

8 Replies

So I am practicing analyzing deals just using a local home i found on realtor.com. Because I've used up the free trials of the BP calculator, I decided to just use another calculator to practice in the meantime. I ended up using free zilcalculator and basically put in the same numbers as i would if i was using BPcalculator. But when the analysis came out, basically i got a super huge negative CoC return which didn't really make any sense. I even lowered the buy price by a whopping 80k and the cash flow still ends up negative... I've attached the Zilcalculator hypothetical analysis for review. Can anyone tell me if I screwed up on entering the number some where? Thank you!

Originally posted by @Brian Cheng :

So I am practicing analyzing deals just using a local home i found on realtor.com. Because I've used up the free trials of the BP calculator, I decided to just use another calculator to practice in the meantime. I ended up using free zilcalculator and basically put in the same numbers as i would if i was using BPcalculator. But when the analysis came out, basically i got a super huge negative CoC return which didn't really make any sense. I even lowered the buy price by a whopping 80k and the cash flow still ends up negative... I've attached the Zilcalculator hypothetical analysis for review. Can anyone tell me if I screwed up on entering the number some where? Thank you!

Never under

Never understood why anyone would need a calculator to run financials on rentals.. 

there are only a few plug numbers its pretty simple math.

and since income and expenses are never fixed and change from month to month or year to year.

to be its just big numbers.

if you self manage A B take off 30% of revenue.. if you out source 40 to 50% 

if its C class take of 40% for self management and 50 to 60% for out source.

run those numbers and see if whats left over covers our mortgage that's all you need.. 

Hello, thank you for the response. I am not sure what you mean by "never under" you meant underestimate any cost? I was simply playing around the numbers to see what sale price would get me an ideal CoC return. but when you see the analysis, it's saying i have a -19% return even if i bought a property for 150k , with ARV 24000, and requires no rehab ..

Originally posted by @Brian Cheng :

Hello, thank you for the response. I am not sure what you mean by "never under" you meant underestimate any cost? I was simply playing around the numbers to see what sale price would get me an ideal CoC return. but when you see the analysis, it's saying i have a -19% return even if i bought a property for 150k , with ARV 24000, and requires no rehab ..

My point is financial calculators of any kind for rental properties are meaningless.. since income is not static and expense are not static.

its a big math number up front if you do better  great.. but always plan fo rthe worse.

This calculator is really hard to read.  It looks like it was designed more for multifamilies or apartments than for single families.  Three things immediately jump out at me:

1) Utilities: Are you sure that you would be paying these as opposed to the tenant?

2) Property Tax: You're paying an effective 4.5% property tax rate.  I know that Texas property tax can be tough but this sounds ridiculously high to me.

3) Rent: You are only getting 1,500 per month on an ARV of 240K? Eek.

Thank you @Frank Jiang I am trying to do the numbers as "worst case scenario" I think this calculator is like you said there must be some algorithm that's not calculating right, because even if i took off the "property tax" completely, the CoC comes out to be only 1.1% which is completely jacked. I think i will try a different calculator and see if the numbers make more sense. The property tax i wasn't too sure about, i pretty much just looked on realtor.com under that listing page and used the most recent annual tax. yea, the rent is atrocious comparing to the ARV (again, everything's hypothetical and for practice purpose only, i just took the sale price and put it as the ARV because the house looks like it's be rehabbed already.)

@Jay Hinrichs Thank you for your input, I am just trying to get comfortable calculating the numbers, and obviously being the beginner that i am ,i would like to utilize every tool possible to help me understand, as i get more experienced at running numbers i believe i can start to do it without the help of the calculator. 

Originally posted by @Brian Cheng :

Thank you @Frank Jiang I am trying to do the numbers as "worst case scenario" I think this calculator is like you said there must be some algorithm that's not calculating right, because even if i took off the "property tax" completely, the CoC comes out to be only 1.1% which is completely jacked. I think i will try a different calculator and see if the numbers make more sense. The property tax i wasn't too sure about, i pretty much just looked on realtor.com under that listing page and used the most recent annual tax. yea, the rent is atrocious comparing to the ARV (again, everything's hypothetical and for practice purpose only, i just took the sale price and put it as the ARV because the house looks like it's be rehabbed already.)

@Jay Hinrichs Thank you for your input, I am just trying to get comfortable calculating the numbers, and obviously being the beginner that i am ,i would like to utilize every tool possible to help me understand, as i get more experienced at running numbers i believe i can start to do it without the help of the calculator. 

My point is rentals are tough things to run through calculators  they can be a baseline but reality of owning them will be different better  or in most cases worse  since its human nature to pick the most aggressive scenarios..  then what happens is those that are micro focused on minute detail drive themselves nuts when the numbers don't match LOL

Originally posted by @Frank Jiang :

This calculator is really hard to read.  It looks like it was designed more for multifamilies or apartments than for single families.  Three things immediately jump out at me:

1) Utilities: Are you sure that you would be paying these as opposed to the tenant?

2) Property Tax: You're paying an effective 4.5% property tax rate.  I know that Texas property tax can be tough but this sounds ridiculously high to me.

3) Rent: You are only getting 1,500 per month on an ARV of 240K? Eek.

 I completely disagree.  This calculator was designed to confuse you to the point of no return (or in this case...returns).  I agree with you, and and @Jay Hinrichs   Analyzing rentals isn't brain surgery.  It's simple math.

Income - expenses (inc. mortgage) = cash flow (income)

Cash flow in first year (income)  =  CoCReturn
Cash spent in 1st year

This calculator, like most, is a train wreck.