Analyzing first two deals, opinions?

Question

New to the rental business.

1st deal August 2013.

2 bed room/1 bath, all brick.

Purchased for 57,500.   All in at $63500(excluding closing costs)

Apprasied $84500.    Rent $850 a month.  Using 50 percent rule(hope to beat that by self managing and low tax state)  850/2= $425 in expense  P/I=$211    net cash flow $214 a month

2nd deal January 2014

3 bedroom/ 2 bath all brick

Purchase $82000  All in $86000(excluding closing costs)

Appraised- hasn't appraised yet, but a conservative number is $110000

Rented $1000 a month(a little low but got the place rented within 2 days)

50 percent rule 1000/2 = $500 P/I= $350    Net Cash flow $150 per month

Any input?

Thanks

Gabe G. · Answer

In all honesty I don't plan to quit my job.

My plan is to accumulate 10 cash flowing properties. As a supplement to my normal income and a buffer if I lose my job.

I believe I can handle managing that many(may be wrong)

At what point do you think self management becomes tough, if you are trying to work a normal 40 hr a week job?

Gabe G. · Answer

Just looking through MLS listings, and trying to find bank owned/va owned properties, and then running the numbers on what the ARV is after fixing things. And see what price makes sense.

Kevin Pfeiffer · Answer

@Gabe Gordon sounds like you are off to a good start.  Keep some money (cash) on hand for emergencies.  Make sure that you are looking ahead for large repair/replace items...furnace,ac,appliances,etc.  Screen your tenants diligently.   I think you can pull it off !!  Keep your eyes open to troubles so you don't overwhelm yourself or your resources.  How are you finding your buys ?

Gabe G. · Answer

bump

Gabe G. · Answer

Greg,

I know cap rate is an important measure on how a property performs. I know this is taking net operating income/ either purchase/appraised price.

My question is net operating income gross rent- Taxes-insurance. What else do you take off your gross rents to arrive at net operating income?

To Kenneth,

Both houses are within 15 miles of me and any future ones should in the same radius. I have various people i have worked with plumbers, contractors, handymen, some I would give work to again, some I wouldnt.

The condition of the homes were ok. Roofs on both are estimated at 7-10 years old, they are in ok shape, could use a path here or there. HVAC on recent property was installed in 2000, on my other it was installed in 2006. New water heaters are in both, before I moved tenants in.

I love the opinions and information.

Keep them coming.

Trevor K. · Answer

10 units with a full time job will be as good, or bad as you make it.  If the units are in good shape, and you rent to good people you could probably do it.  You also will probably figure out as you acquire more properties if you will be able to handle 1 more.  While I have not managed 10 properties at once I imagine the 80/20 rule applies here as it does to most things.  Meaning you will likely have 2 tenants that take up 80% of your time, and sanity.

Kenneth Hynes · Answer

I would echo what Bills sadi and what is the long term strategy.  How far are you from the units, and do you have a regular maintenance / handy man to handle day to day maintenance calls.  With only two unis, you are not going to be high on the priority list of a good handyman, so you may be forced to do some taks by yourself.  Are you prepared to do that.

Cash flow looks good .  One thing you did not mention was the condition on the homes when you bought them ( how old they were , how old was the roof, HVAC , other big ticket items

ken

Raymond B. · Answer

@Gabe Gordon,

Because your self managing your rentals, your estimated 50% expenses, should be in the 38-40% range. Most Managers charge 10% of the monthly rent.

From the figures that you posted, it seems that you're making a nice amount of $$$ per month, from each rental.

Raymond

Gabe G. · Answer

Anybody?

Good/Bad?