First of all let me tell you that I am novice investor, currently owning an SFH rental home in Austin, TX but looking to buy a few more properties by EOY 2018. I am currently evaluating Indianapolis and an offer was accepted a few days back. My issue is that everything happened so fast and I didn't get a chance to calculate my numbers. Basically home is for 140K in an A- suburb with a good school district. My expenses are as follows
- Downpayment - 35K
- Closing Costs - 4K
- Monthly Expenses (Mortgage, P&I) - 750K
- Property Management - 200 (One month rent for leasing, 10% monthly cost)
- Repair Costs - 50
I should be able to rent it out for $1150.
So my monthly cash flow is $150. AM I missing anything else? Is this a good number? Honestly, I am thinking of backing out and losing 2K in terms of earnest money and inspection. Please advise.
I think your repair costs are likely low. That would be only $600 a year. Not clear on the PM cost as to how it translates to monthly rent expected but I assume there is a tenant in place?
I would up maintenance to 5-10% of rent. That assumes there is not any capital expenditures needed in the immediate future.
When financing don't forget that the mortgage amortization piece is not really an expense. It is building equity. My experience is that these type of properties will never yield high rent multiples but are more about the possible appreciation and equity growth while having a tenant create that wealth.
@Manish S. Nail down your numbers and plug them into the BP rental property calculator, if you haven't already.
taxes and hazard ins? Didn’t see that in there....
@Manish S. I actually moved from Austin to Indy 18 months ago. I'm happy to share my experiences. PM me if you want to know more.
Rent to property value is too low. In reality you will not likely achieve positive cash flow long term. This is very common for SFH investors. The real value in SFHs is speculating on the appreciation which is driven by home owners.
If you have the deep pockets to ride out the major expenses, vacancies etc. and it is a high appreciating market that will be your upside.
@Manish S. I have bought 4 SFH in Indy this year around that price point. If you send me a message on here with your email address I can share my excel sheet for tracking expenses and income to help validate your model. Like the others have said I typically go with 5% for expense and 5% for capital.
Don't forget to add in capex (major system replacement - roof, appliances, windows, HVAC, etc). If you're including that in your repair estimate, then that number is way too low.
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