Deals don't pencil. Overestimating expenses? Interest rates to blame?

[Patrick Zepeda]

Hi All!

I am having a hard time finding deals that make sense. I know most BRRRRs won't pencil upon refinancing because of the high interest rates, but I also wanted to make sure I am not overestimating the expenses that crush my RoC and CoC. See below an example of a pro forma:

Rent

$1,200 /Mo

Expenses

- Vacancy Allowance: $60 / Mo (5%)

- Property Taxes: $99 / Mo (from County's Tax Assessor)

- Insurance: $83 / Mo (Avg policy $1,000 per year)

- Property Management: $120 / Mo (10%)

- Repairs & Maintenance Reserve: $96 / Mo (8%)

- CapEx Reserve: $96 / Mo (8%)

NOI

$646 (54% of NOI / Expenses represent 46% of NOI)

Mortgage Payments

$590 / Mo (70% LTV, $80.5K loan amount, 30 year am, 8% interest)

Net Cash Flow

$55 / Mo

Even deals that comply with the 2% rule still don't pencil. Any feedback on how you model your pro formas? Am I being too conservative on the reserve accounts?

Thank you!!