What's your real estate investing criteria?

8 Replies

Since I'm just starting out, I'm curious about other investor's criteria, when met, will make you pull the trigger immediately on a deal. I'm thinking mine is a single family rental home near my house, valued between $65,000 and $130,000. Rented for a monthly NOI of $500 after deducting PITI + $250 just in case expenses. What's yours?

So if I understand you are looking for $500 in monthly cash flow after PITI and $250 for say vacancy and repair contingencies correct? I think your criteria is basically going to be UN-achievable for the most part. In my market for example using a standard deal of say $89,900 sale price , 20% down 4.875% rate, 30yr loan, est $5k in lender total closing cost, and $250 in monthly contingencies, this home would have to rent in the area of $1,300 per month. If you ever find anything like that you better jump all over it. I doubt it will happen but crazier things have happened.

Good luck

Originally posted by @Curt Davis :

So if I understand you are looking for $500 in monthly cash flow after PITI and $250 for say vacancy and repair contingencies correct? I think your criteria is basically going to be UN-achievable for the most part. In my market for example using a standard deal of say $89,900 sale price , 20% down 4.875% rate, 30yr loan, est $5k in lender total closing cost, and $250 in monthly contingencies, this home would have to rent in the area of $1,300 per month. If you ever find anything like that you better jump all over it. I doubt it will happen but crazier things have happened.

Good luck

 That's good to know. I have actually found a few here in Milwaukee, but I'm still getting my financing together. The one I'm thinking of now is a mixed used, already rented out commercial storefront until 2017 for $1150 with a 2bed and 1bath apartment in the back that either I could occupy or could rent for $650/a month. The property is currently listed for $124,900 and it is across the street from a great neighborhood. 4% int. rate with 20% down.

@Curt Davis @Eric Maus  

That description fits almost perfectly with a deal we did last winter. We purchased and rehabbed a 3/1 SF for a total of around $95,000. We had hoped to sell it but eventually rented it out through Postlets for $1350 a month. It is located near the Menomonee River parkway where a lot of older people are moving out and a younger generation is moving in. It cash flows over $700/month after PITI(not accounting for misc expenses.) I had TONS of responses immediately at that rent amount.

Originally posted by @Curt Davis :

So if I understand you are looking for $500 in monthly cash flow after PITI and $250 for say vacancy and repair contingencies correct? I think your criteria is basically going to be UN-achievable for the most part. In my market for example using a standard deal of say $89,900 sale price , 20% down 4.875% rate, 30yr loan, est $5k in lender total closing cost, and $250 in monthly contingencies, this home would have to rent in the area of $1,300 per month. If you ever find anything like that you better jump all over it. I doubt it will happen but crazier things have happened.

Good luck

Can you tell me the best formula for estimating return on investment (ROI) for a rental property that an investor is considering buying? I believe it would be taking the anticipated income from 12 months on the rental market divided by all expenses:

ROI = 12 months rent ( minus 1 month expected vacancy)

                     _________________________________________________

Cash up front to purchase + PITI for 12 months+prop management (12 months)+estimated repairs(12 months)+cost for rehab/cleaning to get it rent ready

Is this how you determine ROI? If not, what formula do you use? Any input would be greatly appreciated !

@Tricia O'Brien

If an investor us getting a conventional loan you can take your net cash flow:

Rent - PITI, property management fee, any vacancy or repairs to get your Net number. Take x 12 months and then divide for the down payment plus closing cost figure.

There are several ways others do this but this is just one way. 

Good luck

Originally posted by @Curt Davis :

@Tricia O'Brien

If an investor us getting a conventional loan you can take your net cash flow:

Rent - PITI, property management fee, any vacancy or repairs to get your Net number. Take x 12 months and then divide for the down payment plus closing cost figure.

There are several ways others do this but this is just one way. 

Good luck

Is net cash flow the same as NOI (net operating income)?

So, using your system, if there was a property with rent value of $995/month, PITI $750/month, property management $80/month, estimated repairs $50/mo and estimated vacancies $50/mo. If the property could be bought for $50K with $10K down (20%) and $1K closing costs then your net cash flow would be : $65/mo x 12/11,000 = 0.071.

So net cash flow is 7.1% ?

Any input would be greatly appreciated!

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