Investor · Collegeville, PA · Member since 2016 · 19 posts · 10 votes
BP gang
I am starting out this year looking to nab my first deal in western suburbs of Philadelphia as well as in gentrifying neighborhoods of Philly. I have my strategy set and calculators warm but struggling to nail down a fast but reliable way to estimate expenses when assessing a lot of potential props. Is 50% rule the best? Is a different % better for this area? Any assistance is much appreciated.
I should also say that I feel I have a good working hold on all the expenses to consider and how in the detailed analysis. Just need the screening approach.
For a quick and dirty calculation. (NOI - PITI)/2 is what I use to estimate cashflow and expenses for a buy and hold. This is a VERY rough calculation. And you'll see that I am simply assuming that after fixedmy expenses, I will keep half of the income and spend the other half on things like repairs, management, vacancy, etc. This comes from my experience buying and renting homes in C and B class areas.
I hope this helps. For more detailed analysis or just to talk more please feel free to send me a DM. I'm a realtor and investor who specializes in working with investors to find cashflowing properties.
For a quick and dirty calculation. (NOI - PITI)/2 is what I use to estimate cashflow and expenses for a buy and hold. This is a VERY rough calculation. And you'll see that I am simply assuming that after fixedmy expenses, I will keep half of the income and spend the other half on things like repairs, management, vacancy, etc. This comes from my experience buying and renting homes in C and B class areas.
I hope this helps. For more detailed analysis or just to talk more please feel free to send me a DM. I'm a realtor and investor who specializes in working with investors to find cashflowing properties.
To me it really matters what type of property you plan to buy. Are you looking at old sf row homes, multis, new builds, condos? Have they been rehabbed with new mechanicals/etc? Are you planning utilizing a PM right away?
For Philly I usually work on a case by case basis with reducing my maintenance/capex % for the first X years on homes I've done major rehabs on. It also will matter if you plan to charge all utilities (including water) to the tenant, if snow removal will be part of their responsibilities (assuming not an HOA), or trash fees for multis.
Right now, I’m looking for sf twins, multis but residential. It’s a great point about property condition and I do try to consider that but before digging into seller disclosure, contacting realtor about roof/appliance ages, I’m looking for a fast and dirty way to do a quick calculation or 2 while looking at listing to assess whether I should acquire those details or not. Like the 50% rule. However as you note, I worry about accuracy of these approaches and don’t want to lose a potential deal either. Any additional thoughts or tricks you use? Thanks so much
Thanks for the insight. Not familiar with that PITI term so will message you. Assuming I can know/assume from listing what expenses I can push on renter, looking for a fast rule to estimate cash flow and CoCROI. I'll IM you but thanks for the time and thoughts
Thanks for the insight. Not familiar with that PITI term so will message you. Assuming I can know/assume from listing what expenses I can push on renter, looking for a fast rule to estimate cash flow and CoCROI. I'll IM you but thanks for the time and thoughts
@Justin Moser In Delco, I use the 2% rule as an initial screen. Taxes are very high as a % of the property value so 2% is necessary to cash flow. Anything older than 1940 (most of what you will find) I plan a full rewire and replumb, regardless of current condition. At the age it likely has knob and tube wiring and cast iron plumbing, both of which will give you problems down the road. Happy to talk more about this if you'd like. Go Birds!
The 50% rule is a rough estimate for real estate expenses but may not be accurate in all markets. Research local market and property-specific expenses to get a more accurate estimate. Use research, market analysis, and due diligence to make informed investment decisions.