Hey, I have been around the website for a couple months. I am a big numbers guy and into excel a lot. When calculating CashFlow and CoC Return I mainly factor in my Expenses Per Month As
- Mortgage (at 20% down at 5% interest for 30 year fixed)
- Monthly Taxes
- Monthly Insurance
- 10% of Rent for Vacancy
- 10% of Rent for Maintenance
Then I take my expected rent (using rentometer,craigslist,knowing the area) and subtracted my expenses to get my cash flow? Am I missing anything that crazy for monthly cashflow? Also all of my numbers are based on if I paid the asking price fully. Any input is appreciated, thanks all!
Will you be managing the property yourself, or using a property management company? If the latter, you would need to factor in ~10% for that to be safe. Are you charging back utilities to the tenant(s)? Advertising costs for finding tenants? Eviction/legal (a 'general' category for the unknowns) could also be helpful if you are trying to be conservative. Also, don't forget to include the things that work towards your benefit like rent inflation.
@mike I would be managing the property myself and with my day job also. I would have my tenants pay for the utilities but by back utilities do you mean as in the months when it is vacant? Advertising costs not so much since the areas I am investing they are predominantly renter friendly, also as a real estate agent I will have some networking through being an agent. Legal or an unknown category have not been factored in, thanks for the input. Again any suggestions at all let me know, I am all ears.
@Mike O'Connor undefined
I was referring to whether or not you paid the utilities for your tenants. Paying utilities while it is vacant can fall into the vacancy or the general section.
Additional items are:
- Utilities - You paying or Tenants.
- Repair Rate
The other factors you have listed above.
Hope that helps
@Mike O'Connor thank you.
You need to include HOA fees if you have them.
Thanks for all the insight guys! Thanks.
While I fully understand the calculation portion of the pre-purchase analysis to see if the deal will cash flow, how do plan on actually accounting for the funds post purchase? Will you actually be putting the different allocations into a holding account for the property? If so do you have accounts for each category?
@James Vega I have talked to my bank and plan on setting up a checking account and savings account for the property. The savings for their security deposit and checking for the rent payments and expenses.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.