Help me decide a deal

6 Replies

Hi everyone,

I am in a situation where I think the numbers don't look very good. Please look at the picture and let me know which numbered property looks to be the most promising from all of these, if any of these at all...

Thanks in advance for whoever gives feedback!

(I have hidden some parts of the spreadsheet to keep provider info confidential... at least I tried to)

@Jaudat S. ,

If everything is essentially equal as far as returns, you gotta look at intangibles.   A house that brings in $15K is going to be different than $9.3K/yr.   Are you looking for turnkey, or rehabbing and getting equity?  I mean blindly looking at it, I'd say go for the highest return, but that doesn't factor in the business element.      If I were you, I'd get the $67K house,  , and then buy another $67K  house... but again-- it's all about business plans!          

@Linda D. They are all the the KC area. I am not considering appreciation in any shape, form, or way. I don't believe in buying for equity, I only go for cashflow. But, I look for good neighborhoods in the B/B+/A- category. These are the first properties that I am even looking at that are giving single digit in 50% rule. Nonetheless, I don't have much experience of the market in the KC area so I thought it would be better to just ask people that might be familiar with the market. Yes, these are turnkey. I go for turnkey because I would give a chunk of return for the sake of saving time. And thank you for the tip. I will give a thought to the 67k buying process you just wrote...

Could you send me the format you used for this? This looks awesome.

Did you make a decision? I'm also working numbers.

@Nadia V. So, Gross rent = rent rate × 12 months = gross rent for the year ROI = Gross rent ÷ total cost of buying the house(including closing costs, inspectors etc) × 100 Now, you can put in the rate for management. If your PM charges 8 or 10 percent, you put that. Check for the average vacancy rates in the area and put that in. Now, add maintenance. If it's a new house, you can put 5 percent or if it's old, you can put in 8 or 10. Add insurance. Now, subtract all these "expenses" from your gross rent. This will give you the net rent. Now, ÷ the net rent with the total cost of acquiring the property. This will give you NOI(Net return on investment). Now, if you're financing, get COC = NOI ÷ down payment × 100 P.S. If you're planning to keep the property for a longer time, consider CapEx for roof, HVAC, boilers or what not. Furthermore, this calculation does not consider mortgage because that is separate, and deducted from the remainder rent. You can subtract mortgage from the net rent and that will give you cash flow.

@Jaudat S.

Sometimes capex is more due to weather variations. also consider buying in A minus neighborhood of KC to get better quality tenants. 

i know bay area cash flow is limited but you can look in sacramento area for lower priced SFRS.

i recommend buying a couple of local rentals before venturing OOS. 

happy to share info on any memphis investing if interested

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