Am I Too Conservative?
I've found that after I take into consideration my contingencies seemingly good deals on the surface don't look so attractive any more. I wonder whether my assumptions/budget is too conservative.
I generally use the following assumptions:
[Based on a SFR: 1500 sq. ft./$850 Rent]
10% vacancy
$1000/yr Cap Ex Reserve
$100/mnth maintenance/landscaping/etc.
$1200 annual turnover cost (Breakdown: 1 turnover per year; Repairs: $100; Painting: $375 ($0.25/sq ft); Cleaning: $150; Management Fee: $850 (1 mth rent); Flooring: $375 ($0.25/sq ft); LESS Deposit: $850 (deposit) PLUS Evictions: $100/yr (using 10% eviction rate/$1000 eviction cost); Marketing: $100)
For example, for an Indianapolis - SFR (3bd/1bth; $65K purchase; $850 rent; $600 Insurance; $0 Utilities Paid by Owner; Tax: $1900) the Cash On Cash is about 4% / $240/mth.
Using the 50% rule, $425 would be leftover per month. With my numbers, I'm calculating 72% Expenses & 28% NOI.
I'm eager to get my first property but don't want to be blind-sided by foreseeable expenses; however, if I play it too safe then I'll never get in the game. Are my numbers off?