Real Estate Consultant · NH · Member since 2019 · 27 posts · 5 votes
I am looking for input on methods being used to quickly qualify or disqualify properties. Spending a lot of time running numbers and wanted input from the community on what key metrics are being used to evaluate a property quickly so it either gets a deeper dive or it is scratched from the list.
Property must have monthly rent of at least 1% of the "all in" cost (purchase price + closing costs + rehab + holding costs). Example: If it rents for $500, spend no more than $50,000.
I use the 2% Rule. $30,000 "all in" rents for $600.
Most houses that do not meet at least the 1% Rule will not cash flow positive unless you pay cash or have a sizable down payment. It's a quick-n-dirty method, and there are others.
I like that you include condition age of the property.
How do you use that in your cost analysis?
I understand the common sense part. Older the building.. More capex cost.
Do you use (ABCDEF) for just keeping track of how old it is?
The older the building, the higher is the operating expenses. The age of the building or when it was last renovated is key in determining how old it is.
Some quick thoughts on analyzing rental properties in NH (assuming your goal is achieving cash flow, if it is not, then disregard):
- If you are putting 25% down, 90% of single-family properties and condos are not going to cash flow any amount that justifies doing the deal and spending your time on it. To drill down further, you'd need to be under $175k throughout most of the state.
- Follow the 1% rule when it comes to small multifamily properties (2-4 units). If a property doesn't meet that metric, it likely won't cash flow. If it exceeds that and creeps into the 1.2% - 1.5%, it's probably worth a longer look.
Key issues with investing in New Hampshire are high property taxes, high maintenance costs due to older housing inventory, and a competitive marketplace (no surprise there, though). These typically make single-family rental property investing unfeasible if you're goal is cash flow.
@Tony Wallis, I agree with @Kenneth Garrett. Don’t short change the process. You need to learn your investment area and figure out what works. A lot of what people mentioned are thumb rules and will not work in all instances. Analyze a bunch of properties in the area you want to invest in and you will be able to answer your question for your area.