Newbie Rental Analysis Needed!

4 Replies

Hi all,

Wondering if you could give me some feedback on these numbers. This will be my first rental so much advise would be appreciated!! This home is in a good area, right near several colleges - therefore it would be rented by college students:

Purchase Price - $150,000

Annual Rental - $31,020

Expenses (taxes, insurance, repairs, utilities, PM, etc.) - $16,544 

NOI - $11,892

Annual Mortgage - $6,162

Cash ROI - 11.18%

Total ROI - 14.66%

What do you all think about these numbers? Does this seem like a good investment to you? Thanks in advance!!

These numbers look really good to me... Just taking the annual rental, and annual mortgage into play the numbers look to sit as follows using the 50 percent rule (which assumes coverage of the expenses).

$6,162/12 = $513.50

($31,020)(.50)/12 = $1292.50

Cash flow = 1292.50 - 513.50 = $779

Using the 2% rule, it looks like you are on the high end of the 1.5 - 2.0 range, which is great sitting at 1.73%.

I got this by monthly income divided by purchase price x 100.  ($150,000)/(2585)(100)= 1.73%

I think you're in good shape.

Subtracting the expenses from the rent gives me $14,476 in NOI. Am I missing something? With your NOI number you have a cap. rate of 7.9%. With my number it is 9.6%.

To me it is a good deal if it meets your return requirement and/or the return is at or above those in your area.

Good Luck.

Bill

The numbers look pretty good to me. I'm not sure what expenses includes, but as a rookie I would try include an extra 5% in reserves, 10% management even if you are going to manage it, as well as 5% cap ex and 10% vacancy. Its always best to over estimate then under. At least thats what I did with my first property!

How are you financing it? Are you buying it with cash?

@Kyle Cabral thanks for the input!

@Bill Jacobsen I forgot to add that was including a 1 month vacancy rate. The previous owners have had pretty minimal vacancies in the past five years while using a PM so I'm thinking it will be closer to that 14K

@Christian Bors thanks, I will have to add those numbers in and see how it looks. I am putting 45K down (going in with another investor) and then financing the rest at a 30 yr mortgage - hoping to have it paid off in 8-10 years.

I currently have a full time job so there is no number that I need to meet - I am just looking for a good long term investment. My plan is to buy more, but I think I am having trouble knowing where the numbers should be (I know it is different for each investor, but general guidelines, i.e. you really shouldn't go below this number, etc)

Thanks!

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