The Numbers Work Out... (according to the listing) - Now what?!

10 Replies

Hey Guys,

I've found a few properties which meet my cash flow requirements (over $100 unit) with 8% vacancy/repairs/capex and 10% property management costs with over 12% cash on cash return. Starting out, I'm still skeptical to move forward. What are the next things you all do to make sure you'll be able to find good tenants and that its a good area?


Thanks!

@Drew Lied I agree with @Nicole Heasley - what are your suspicions? 

Are you familiar with the area? If I run the numbers and they meet my requirements, and it's in my area, then I buy it...

You may just be getting cold feet since its your first deal. Mitigate your risk by not putting all your cash into the deal and running it by someone else with more experience (maybe in the forums?). 

You'll have to pull the trigger at some point! Best of luck!

Originally posted by @Drew Lied :

@Cameron Tope & @Nicole Heasley Thanks for the advice guys. I live in Philly and haven't been able to find a good deal so I've went outside the city and found a few. Problem is I'm not familiar with the areas. Any advice on if it's a good market or not?

We predominately like B class neighborhoods. If there are people making money in your market then you can make money. 

Be cognizant of the number of employers in your area. We invest in Houston, TX (a large city with many employers) but if you invest in a small town then be sure you understand that risk. We also invest in a small town in Ohio (Athens) but it's a university town and we market to the college students. 

Best of luck!

1. What's it going to cost to put the property in rent condition?
2. What is your rent rate based on? (is this property equivalent to others?)
3. Have you seen the property in person? Just driving the blocks around the target property may provide some good info.
4. Will you have enough operating capital to hold the property and do repairs prior to placing a tenant? (I'd want about $10k for that)

@Drew Lied

Some of the things I look at when analyzing an area! 

Are there any economic engines in the area. Some examples would be a College or University that is increasing in enrolment, a hospital, tech jobs, military base? Is The town growing or shrinking? Are traffic counts increasing on the streets around your subject property or decreasing? Hope that helps. 

@Drew Lied   I don't think 8% for capex, maintenance and vacancy is enough unless you have a long term renter and a fairly new house.  I currently use 15%.  

As the others have said the only way to become more comfortable with the situation is to have more confidence in your numbers.  That might be doing additional rental comparisons, call utility companies for actual numbers, talking to other investors in the area, etc.  

But at some point if the numbers make sense you just have to take the plunge. 

Originally posted by @Drew Lied :

Hey Guys,

I've found a few properties which meet my cash flow requirements (over $100 unit) with 8% vacancy/repairs/capex and 10% property management costs with over 12% cash on cash return. Starting out, I'm still skeptical to move forward. What are the next things you all do to make sure you'll be able to find good tenants and that its a good area?


Thanks!

If it’s multifamly you can PM me the address and I’ll tell you what I know about it.

But either way, google and Zillow can tell you everything you’d want to know about every metric in every submarket