Hello all, I have been looking at Staten Island Homes, multi family to be exact at a max price of $299.999. I would feel most comfortable buying around 250,000 or less because I was thinking the less I go and still putting down anywhere from 20-30% down I will have a higher cash flow. The thing is there really is nothing out in my price range right now except for a bunch of short sales which my RE agent says not to get into. Anyway, I was thinking of increasing my max search price to 350,000 and there are more options to chose from and the homes are a bit nicer as well. If I still do the 20-30% down this will pretty minimize my cash flow greatly, but I believe maybe it will/can work out if I have 2 tenants paying there rent which would balance everything out. Also I could negotiate the price of a multi family listed at 349,000, not sure how much lower I would be able to get it for though. Not sure exactly what to do or how much I can afford. I have about 70k in savings. Any tips/advice much appreciated.
Take a look at the rental calculator here on BP. It will tell you exactly how the numbers should work out. It will give you a way to compare any number of places, no matter the price tag.
More importantly you need to set your investment minimums. You need 2 things here, an ROI (cash on cash return) AND a minimum cash flow per month. On MFH I want to see 15% Cash on Cash and $125/month/door.
First of all, congrats on having $70k in savings, @Eric DeVito . Not many can say that! A couple of my thoughts are 1) Find an agent willing to do the work a short sale takes so those are an option for you, 2) Find a larger property and do a Master Lease Option on it with some of your money as the option consideration. I am involved with one of those. A 4-unit on .8 acre lot that has room to build more, plus three other SFH on adjacent lots owned by the same guy. I will be able to receive rents and control $520k worth of property for 3 years with $30k in consideration. That's more than I have ever coughed up without ownership, but the benefits appear to outweigh the risks. Just an idea! Seriously - don't just dismiss the short sale idea because your realtor said to. Find one that's hungrier!
You can. I recommend figuring out all of that information before relying on the calculator solely. Google has all the answers :)
I have an Excel spreadsheet that I use. It does most of what the BP calculator does, but without the long term growth section. Plus mine is faster to modify.
Net Income / Total Investment
4/2 SFH purchased for 55k
5k more in closing costs
Total Investment 60k
Net Income 2014: $5000
ROI = 5000/60000 = ~8.33%
Thank you for the example Aaron. Now with the example you just gave is that a buy and hold rental property? If so would the net Income be the total profits you receive after all the other expenses are paid off. I.E. Taxes/Monthly Payment/Vacancy.
Yes, that is a Buy and Hold example.
Net Income/Loss is final total for a time period, generally a year, after all expenses are subtracted from income. Net Income is a bit more complicated for big corporations, but much of that doesn't apply to smaller operations like a rental property.
Take a look at Investopia. They have most of these terms defined.
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