Would You Buy it?

[Jen Teske]

Great area - here are my numbers:

Monthly	Annual
Purchase Price	168,500		Monthly Rent	2200
Cash to Close (20% + $4k close costs)	33,700		Annual Rent	26400
Property Tax	$375	$4,500
Insurance	100	1200
Mortgage	835	10020
Vacancy (5%)	110	1320
Repairs (5%)	110	1320
Total Expenses	$1,530	$18,360
Net Income	$670	$8,040
Net Income without Mortgage	$1,505	$18,060
Cap Rate	5%
Cash on Cash	24%

[Johnny Kang]

@Jen Teske

I don't know the area so I can't speak about the market you're in, but just by looking at the #s, you're missing a few things: Water, Sewer, Heat, Electric, Gas, Trash, Lawn/Snow removal, Cap Ex, Property Management (even if you're self managing, this needs to be factored in if you want to scale), and although you did include vacancy, if a real vacancy were to occur on a SF you'd have a 100% vacancy, making it negative cashflow since you'd have to cover all the expenses, not knowing when it'll be filled again. Worse yet, if you had to evict someone, it can wipe out many months of cash reserves. This is one of the few reasons why some people choose to invest in multi-family; to spread the risk.