I am looking at turnkey (new/newer construction) in Dallas and/or Jacksonville for long term hold to give to my kids. Based on members actual experience would I be safe to assume in my pro forma:
Rent to value ratio: .85%
10% repair/capex reserve
10% management fee
Annual rent increases: 1%
Property tax, insurance and appreciation are not part of this discussion as those would depend on the specific market. I want to make sure I am conservative and would appreciate any feedback whether good or bad from actual turnkey investors.
You missed insurance and taxes. Personally I acount for 8% vacancy, 10% maintenance and 8-10% CapEx, but CapEx depends on the property age so you need to figure that out. If you want to hold it long term, you need to do the math because you'll nees to replace tge roof, windows, water heater, and furnace at least once, and if you have carpet that will be replaced more frequently. Also you need to consider the turnaround cost after a tenant moves.
Where I invest, to evaluate the deal quickly, I consider 50% of the gross as expenses, then I calculate my ROI.
ROI= (annual rent x 50%)/acquisition cost.
If you have a debt service (mortgage) on the property, you should add it to your expenses.
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