Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
10mo
Do you like to work for free? That is in effect what you are doing and f you do not include PM fees in your underwriting.
Your maintenance/cap ex fees is likely too low by a factor of 2.
You are missing the misc charges like asset protection, bookkeeping/accounting/tax man, utilities due to property issues such as by a slab leak, legal/evictions, etc.
The 50% rule is aggressive at this rent point and projects $82/month of cash flow. I think you will be challenged to obtain sustained cash flow of $82/month.
I believe finding cash flow positive properties is challenging. Columbus has fairly good appreciation. I believe if you look at this as largely a learning opportunity, this property can meet those expectations without costing you a lot of money in negative cash flow. However, if you are expecting this property to make a substantial difference to your lifestyle n the near term, I fear you are likely to be disappointed.
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Considering this property as a starting point for my investment portfolio. Any feedback or thoughts appreciated.
Hi @Jihaun Whatley, welcome to the BP Forum! Any chance this is for a 2-3 bedroom SFR in Columbus?
Yes it is, It seems like a potential starting point, its two 2b/1ba.
@Jihaun Whatley Is this a turn-key property? And given the size/price point, this sounds like a Section 8 property, is that the path you're pursuing? Also, are you looking to getting a HML or a loan from a local bank or credit union?
Real Estate Agent · Columbus | Toledo · Member since 2019 · 608 posts · 768 votes
10mo
I'm assuming this is a turn-key single-family long-term rental that you will be self-managing. With that, do you have the setup to self-manage? (Handymen, legal leases, etc.?)
Numbers are always based on individual investor goals, but this could be a base hit for investors looking to hold for appreciation while making a little cash flow.
Are all the mechanics brand new (roof, plumbing, electric)? If so, you're getting a steal if this is in Columbus. If not, you have to set replacement costs aside for these as well as ongoing CapEx payments.
Real Estate Agent · Columbus | Toledo · Member since 2019 · 608 posts · 768 votes
10mo
I'm assuming this is a turn-key single-family long-term rental that you will be self-managing. With that, do you have the setup to self-manage? (Handymen, legal leases, etc.?)
Numbers are always based on individual investor goals, but this could be a base hit for investors looking to hold for appreciation while making a little cash flow.
Are all the mechanics brand new (roof, plumbing, electric)? If so, you're getting a steal if this is in Columbus. If not, you have to set replacement costs aside for these as well as ongoing CapEx payments.
Turn-key, neither tenants on section-8 but it's a possibility. Loan from local bank and cash.
@Jihaun Whatley Couple of things seem off from your Rental Analysis. Vacancy rate of 4% is probably too low - I'd use at least 5%, but 8%-10% is probably more realistic. I'd be surprised if you can get $1,495 in rent on a $125k property. I know the property on Arnsby is asking $1,495 for rent, but doing comps in that zip code, I'd estimate its rent should closer to $1,100. And even if you're going to self-manage, I'd add something to the Management Fees.
For the loan, did the bank commit to a loan of 80% LTV? Do they require a minimum Debt Service Coverage Ratio of either 1.20x or 1.25x? Also, did they say they'd offer 30 year amortization? Most banks I work with in the Midwest max out at 25 years.