Percentages for Deal Analysis in Metro Detroit

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Percentages for Deal Analysis in Metro Detroit

Nader Hachem
Dearborn, MI · Member since 2019 · 124 posts · 41 votes

Good afternoon BP!

I've recently been spending a lot of my time during this quarantine analyzing rental property deals using the BP calculator. My main method is find houses off the MLS and going from there. I usually set my range for houses from 50K-150K. I was wonder what percentages do you guys use to analyze deals? I've been using Vacancy 6% repairs 5% capex 8% and prop management 10%. I don't want to over/underestimate these because i feel like they are the main part for analyzing deals.

I've been looking in the Metro Detroit area such as Taylor, Melvindale, Westland, etc..

Also open to other tips you guys have when analyzing deals! (such as running comps and rent prices)

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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
6y

@Nader Hachem

Both Joe's are correct. You'll find that different areas, property types, condition of property, target market tenants, etc. all impact what the actual numbers will be.

You may want to explore and understand the 1% Rule and pick your number. You can search for it here on BP.

By the way, if you're buying a rental, start interviewing property managers ASAP and involve them in the review process before you finalize a deal. We've saved many clients from buying what looked like a good eal, that would have been a bad rental.


[email protected]248-209-6824
Logical Property Management4.9459 Reviews
WebsiteView Page
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  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y

    If you don't want to underestimate, then don't use percentages in your analysis.  Use numbers with $$$ in front...actual ones based on the areas/markets you're trying to analyze

    Also, not all the areas/markets you mentioned have the same $$$ or %%% for anything...much less all the micro-markets within those markets.

    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    6y

    @Joe Villeneuve thanks for the advice. What $$ numbers do you use in your analysis on you properties and what’s a good way of figuring that cash amount out in these markets?

    0Reply
  • Joe VilleneuvePro Member
    Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
    6y
    Originally posted by @Nader Hachem:

    @Joe Villeneuve thanks for the advice. What $$ numbers do you use in your analysis on you properties and what’s a good way of figuring that cash amount out in these markets?

    If you are Flipping

    A - Sold Comps in the immediate area that are within 10% of the sq ftg of the property you are analyzing sold within the last 3 months 
    B - Needed Profit in Dollars...not percentage (pay yourself first or why bother)...and don't change the number.
    C - Cost/expenses associated with buying property  
    D - Maximum Offer on property (in dollars, not percentages)...and don't fudge the number, or rationalize a different number

     A - B - C = D


    If you are Holding

    a - Rental Comps in the immediate area that are within 10% of the sq ftg of the property you are analyzing
    b - Needed Cash Flow in Dollars...not percentage (pay yourself first or why bother)...and don't change the number.
    c - Cost/expenses associated with holding property that you have to pay...not the tenant
    d - Maximum mortgage payment you can pay
    e - Maximum mortgage you can afford on the property (in dollars, not percentages) based on terms you are getting from lender (unterst rate and term length)...and don't fudge the number, or rationalize a different number
    f - Down Payment as a percentage
    g - Down Payment in dollars
    h - Maximum offer you can make in order to get the cash flow you need

    a - b - c = d

    e + g = h

    2Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    6y

    @Joe Villeneuve thank you!

    1Reply
  • Joe HammelBusiness Member
    Real Estate Agent · Metro Detroit, MI · Member since 2018 · 614 posts · 666 votes
    6y

    @Nader Hachem

    Hi Nader!

    I use 7% vacancy, 7% Capex, 7% maint, 10% management.

    I've seen 5,5,5,10, for less conservative and 10,10,10,10 for very conservative.

    Vacancy: is fairly predictable and it could be wise to chose your market looking for low vacancy. If I know I'm looking at buying a 3 bed 1 bath home in a specific area. I pull loose, lease comps for the past year or 2. If I see that just about everything has leased out in under 30 days, and my house is is very nice condition, and my rent will be set at a competitive rate, I know I won't have much issue renting it out.

    CapEx/Maint: If you're buying a house and completely rehabbing it, you know you can use lower estimates. If you're buying someone else's rental because they're "getting out of the business", good chance that house has some deferred maint.

    This is why is use 7,7,7,10 and I consider that fairly conservative. If numbers look good there, I might adjust them a little bit to the specific deal.

    [email protected]248-422-1685
    FIRE Realty Team - Keller Williams5379 Reviews
    WebsiteView Page
    1Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    6y

    @Joe Hammel thanks Joe! I ran my numbers around 6,5,8, and 10 so it’s nice knowing I’m around the same ball park as someone who’s experienced in this area!

    1Reply
  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
    6y

    @Nader Hachem

    Both Joe's are correct. You'll find that different areas, property types, condition of property, target market tenants, etc. all impact what the actual numbers will be.

    You may want to explore and understand the 1% Rule and pick your number. You can search for it here on BP.

    By the way, if you're buying a rental, start interviewing property managers ASAP and involve them in the review process before you finalize a deal. We've saved many clients from buying what looked like a good eal, that would have been a bad rental.


    [email protected]248-209-6824
    Logical Property Management4.9459 Reviews
    WebsiteView Page
    2Reply
  • Jeffrey EdwardsPro Member
    Real Estate Broker · West Bloomfield, MI · Member since 2018 · 152 posts · 77 votes
    6y

    Where on these estimates are you guys factoring in property taxes and insurance? 

    [email protected]248-270-2740
    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    6y

    @Jeffrey Edwards there's separate line items in the property in the BP calculator. I'm using the MLS so I'm able to get the tax numbers off that. For the insurance, I call up an insurance company and got an estimate for one property i was looking at. The rest are similar in location and type to that property to i added some cash into the number they gave me as a buffer

    0Reply
  • Nader Hachem
    OP
    Dearborn, MI · Member since 2019 · 124 posts · 41 votes
    6y

    @Drew Sygit will do. I’ve called a couple property managers but I am looking to definitely step that number up. 10x it as Grant Cardone says!

    0Reply
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