How do you figure out what's a good deal in your market?
I am finally in the position to be able to purchase my first property, I am pre-approved, have the capital to spend, and am running the numbers for every property on the MLS in a 40-mile radius. The problem is after running through 80+ properties I have realized two things.
#1 The Bigger Pockets deal analyzer video numbers don't work out for my immediate area, having 5% for a vacancy, 5% for repairs, 10% for capital, and 10% for property management leaves you with 0 properties that cashflow in my area.
#2 I remember that all of the properties I have looked in the past 6 months have not cashed flowed but I am not picking up on what is the norm.
To figure out what a good deal looks like in my market, I have turned to the spreadsheets and I have started to record all the numbers for each property that I analyze and the data is now telling me what the market looks like.
For example:
The 1% rule doesn't work for the purchase price -> rent income I now know anything that is higher than 0.68% is above average in my area.
The 50% rule for expenses doesn't work but around 70% does.
This has also given me a good range of expected expenses based and allowed me to see a large range for how much each unit can rent given for in my area. The more numbers I collect the better the picture of the market I get.
So BiggerPockets what rules of thumb are you creating for your area?