Help me calculate COC return....

2 Replies

Kind of new to REI and Bigger Pockets. I own a SFR that used to be my primary but has been rented for 2 years now. I am looking to purchase my second investment property and have done the other basic calculations that BP recommends, but am having difficulty in figuring out how to calculate the Cash on Cash return. To me it looks like you have to add in hypothetical numbers (estimated monthly repair costs, vacancy rate, etc..). Is that correct?

Here are the properties that have interested me (not sure if either are section 8):

Duplex built in 2002 consisting of 3/2 1050sq/ft each for $94,900

Currently both units occupied with $670/month leases (not sure of the lease terms).

New roof in 2015, new Central A/C units in 2013 and 2015.

Outside looks good, inside looks clean with decent kitchens (basic L shaped) with laminate counters, tile floor in kitchens, what looks to be berber carpeting everywhere else. Overall looks good in pictures. 

Financials: 

List Price: $129,900 

20% down: $25,980

Financing: $108,420

Closing cost: EST. $5000

Total investment: $30,480

Mortgage payment: $530/month (Conventional 30yr at 4.6%)

Annual rental income: $21,000

Annual Expenses:  

Property tax  $1200 (verified through property appraiser website)

Insurance $1,200 (best guess)

Prop man.$1,680 (8% of rent)

Mortgage $6,360

Calculations:

NOI = Income (minus vacancy)- Expenses (Prop tax, insur, and Prop mgt)

        = 21,000- 4,080 

         = $16,920

Cash Flow = NOI - Debt service (mortgage)

                  = 16,920 - 6,360

                  = $10,560

ROI = Cash flow/ Investment basis

       = $10,560/ $30,480

       = 34.6%

Cap rate = NOI/ Purchase price

                = 16,920 / 129,900

                = 13.0%

 Cash on cash = ???

2nd Option: 

Quad-Plex built in 1981, doesnt say if any improvements have been made (at least on the MLS page)

All units are 2/1 about 970 sq/ft each . Tenants pay electricity, not sure about water and i believe there would be a dumpster unit rental every month (there are other quad plexes on the same street)

2 units rent for $450 each

2 units rent for $425 each

Total rent income: $1750

No pictures are listed, and will only let you view inside if offer is made.

Financials:

25% down: $25,980

Financing: 108,420

Closing cost: EST. $5000

Total investment: $30,480

Mortgage payment: $530/month (Conventional 30yr at 4.6%)

Annual rental income: $21,000

Annual Expenses:

Property tax $1200 estimated

Insurance $1,200 (best guess)

Prop man.$1680 (8% of rent)

Mortgage $6360

Calculations:

NOI = Income (minus vacancy)- Expenses (Prop tax, insur, and Prop mgt)

= 21,000- 4,080

= $16,920

Cash Flow = NOI - Debt service (mortgage)

= 16,920 - 6,360

= $10,560

ROI = Cash flow/ Investment basis

= $10,560/ $30,480

= 34.6%

Cap rate = NOI/ Purchase price

= 16,920 / 129,900

= 13.0%

I realize i forgot to add vacancy rate to the duplex. 

Do my calculations look right? The quadplex looks to be in good shape, at least from the outside. 

For the COC, i'm assuming what i am missing is adding in the cost of possibly a water bill, dumpster rental, and a monthly estimated "repair" cost?

Any help/advice will be greatly appreciated.