Low Cap Rate and Cash Flow related Confusion?!
So, color me confused. For example, a duplex in Manchester, NH could go for $210k and both units could be rented for a total of $2,400 per month. That means the NOI could be $1,119.67, Cap Rate of 0.533 % and Cash Flow of -$99.33.... Here's the per month numbers I'm looking at with an FHA Loan for 30 years & 3.5% down payment at 4.85% interest:
Expenses:
- Taxes: $391.67
- Homeowners Insurance: $66.67
- PMI: $150
- Vacancy (5%): $120
- Repairs (5%): $120
- CapEx (8%): $192
- Property Management (10%): $240
- Mortgage: $1,219
- (Tenants would pay for utilities)
And... like, this isn't even accounting for Lawn care or Snow removal...
Total Expenses: 2,499.33
NOI = $2,400 - $1,280.33 = $1,119.67
Cap Rate = $1,119.67 / $210,000 = 0.533%
Also, for the 1%, 2%, or 3% rule this comes in at 1.143% = $2,400 / $210,000
So, this is being generous, really. $210k is on the lower side and I'm assuming I'll take care of the lawn/snow.
I'm most confused at how this can really change in any one direction to make it meet the 8% cap rate or the 2% or 3% rule... like the only way I can see it meeting those is by jacking up rent or getting the house for free by a family member. *slams head on desk*
-Joe