Hi Investor Friends
I need advice. I am looking at a property that looks like I could get for 150-160k the HOA is $42. And the possible rent is at $1450-$1600. This property is rare because it has 4 bedrooms and most around it have only 3.
Im planning to put 20% down. What do you guys think?
A useful tool for determining the expected return on a rental property is calculating your Projected Cap Rate. Here at Crestar, we calculate this figure as follows:
=(Annual Rent - Estimated Annual Maintenance, Leasing Fees, etc. - Annual HOA - Annual Taxes - Annual Insurance)/Total Cost
We tend to use the approximation of 30% of annual rent for the maintenance/leasing fees. As you may know, the maintenance costs associated with the property will be highly correlated to the age and condition of the property. We suggest having a thorough inspection done before purchasing the home. Even still, they could end up being much higher or lower than the general 30% approximation.
A good ballpark of an ideal projected cap rate is about 10%. If it is much higher, your investment looks promising; much lower would indicate your investment is better off in other places.
Hope this helps!
Private Hard Money Lender
Affiliate of Crestar Group of Companies
Everyone has their own numbers and way of "discovering" a deal. I look at cash on cash. My take away / the cash I out put. I personally operate in class A properties which have smaller number but more appreciation, I self manage, and less expenses. So the key is to figure out what works best for you!
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