Financial Analysis For Buy & Hold In Boise Area
Hey guys,
As a newb I am looking to buy my first property. I have spent a LOT of time reading as much as possible and found Brandon Turner's book "The Book On Rental Property Investing" to be one of the best reads so far. Also the Bigger Pockets pod casts have been another great source. With that said it seems like the returns that Brandon and other investors are getting on buy and hold rentals are not possible here in Treasure Valley. For example Brandon in his book and on the pod cast said he shoots for the following:
CoCROI = 12% w/ Appreciation = 3%
When he interviewed David Osborn (Podcast #226), David said he expects a minimum of 15% CoCROI.
Brandon says that CoCROI is Cash Flow / investment.
Where Cash Flow = Monthly Rental Rate - Mortgage payment, property taxes, insurance, vacancy rate, repairs & main, cap ex, and PM fees.
Investment = down payment + closing costs
When I'm doing my calculations on local properties I'm not seeing anywhere near these numbers. Brandon also suggested some rules of thumb in the book such as the 2% rule. The 2% rule is taking the rental rate and dividing it by the purchase price to get a %. If that % is over 2% then the property is worth investigating. When running the 2% test on properties here they work out between 1% on the highest side to 0.7% on average and as low as 0.6%. Looking at REOs improves this a bit but still not close to 2%.
With that said anyone care to share what they realistically are shooting for with their criteria when investing here? What kind of CoCROI are you guys seeing? Are most investors here basing their investments heavily on Appreciation since prices are averaging over 6% increases annually?