Looking to build models for a business plan. The models I'm trying to figure out are more scientific vs. guestimate. I was hoping to get some rock solid models from those that have done this for years.
1. Looking for a numbers/business model for single families (local and distant)
2. Looking for a numbers/business model for multi-families 4 or less units (local/distant)
3. Looking for a numbers/business model for larger multi-families, 5+ and apartment buildings (local/distant)
Also, in your opinion, would starting small with smaller down payments be better than just going in bigger for the first couple deals? I don't want to eff up and blow the first deal and screw myself out of the business....so i'm thinking #1 & 2 first, and because they are residential still so easier to make the initial deals...
Been calculating using the 50% rule, but haven't had much luck working what I think is a deal...Trying the NOI model, but again, having a difficult time getting the numbers right in my head and on paper.
Do the seasoned folks just have a certain criteria, such as, if the NOI is under X, it's a NO GO. Or if the 50% rule is X or better, lets make a deal, etc?
Figuring the numbers out is the toughest part other than figuring out the FMV and where I should be offering...Once I get these models and pricing points down, I have just taken the next level and can start making offers, etc...
There are many 'models' in the FilePlace available for downloading. Every investor is different and will use a separate criteria for their strategy. From what I've seen, most people are using Cash-on-Cash ratio, ROI or Cash Flow ($100 per door, $150 per door) as their Go or No-Go numbers. You'll have to use the numbers that work with your strategy and lifestyle.
Be sure to account for the following expenses in your calculations:
Vacancy (10% of gross rent)
CapEx (generally 7-10%)
Snow Removal/Lawn Care
To find deals that make the numbers work, you may have to explore outside of your immediate area to a 1-2 hour radius. I know properties in my area are very expensive compared to rents, and I am trying to find how to make my own numbers work here. It sounds like you have your spreadsheet model basically created. My suggestion would be finding at what price point your numbers do work and to start putting offers in. You can also find motivated sellers where prices will be at larger discount, instead of using the market priced MLS.
Remember: Every deal is different and unique.
@Drew MacDermott thanks for the tip about the fireplace! I will check it out ASAP! Also thanks for the notes on the other fees. I wasn't projecting that high and you are the 2nd person to chime in on that.
The model that you should be looking at is IRR.
Ben Leybovich has a pretty good article on it here:
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