Hello everyone first time posting here. I know some of the questions I may ask might not be answerable but I'm looking at purchasing my first property. I've been doing alot of reading and looking at the formulas here to see if its a sound investment. The property I've been looking it has been on the market for quite some time its selling for 59k 5 units avg all 2 bed 1 baths avg rent is 500 each sure seems like a winner. I know the area its in its obviously not the best for the orlando area mostly lower income. but at 2500 a month gross and a possible mortgage under 500 would you take the risk? I know i gotta get my feet wet but a little nervous. Not to mention my credit is not the greatest its about 620-640 roughly however I do have about 9k cash to play with. Any tips thought should I try getting a pre-approval for the loan? I really would not like to pull my credit if anyone thinks this score is unacceptable.
This looks like a great deal at the outset. 40% ROI probably makes working in a rough neighborhood worth it... but you need to figure out if you'll actually be making epic returns. The place looks good, but if have to pay electricity bills on 1970s era AC units and your tenants keep their places at 60 degrees, this may become a loser quickly.
I would find out exactly how much the following expense are going to cost you each month. "The tenant pays" is a good answer as well. Put those numbers up here and I'll tell you what I would pay for the place.
Sewer and Water
Cap Ex and Ops
Mgmt Fee - as a % (general consensus here on BP is 10%. include it even if you think you are going to self manage)
Vacancy- as a %. (8% represents 1 vacant month/unit/year)
ok so did a little more home work here
Taxes are going to be very low compared to what I thought?
Taxes each unit are going to be $138x5---$690 annually
assuming properties utilities are are tenant paid
HOA-$190x5 monthly ---$11,400 annually
still not sure what the caps or ops would be this is to get the property in good condition correct?
PMI-is $100 a month a fair assesment so $1200 annually
10% management fee this will be off the gross income of the properties annually correct? if thats the case $3000
Vacancy 8% - $2400
Assuming mortgage - $350 --$4200
so total anual gross income $30,000
so total expenses annually $22,890
leave me $7110
and then we need to use the 50% rule right for future upgrades and repairs $3555 repairs and the other $3555 annual cash flow so basically 300 bucks a month
First time doing this hopefully I got it if anything looks off please let me know