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Real Estate Deal Analysis & Advice

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Jonathan G.
Pro Member
  • Investor
  • Tyler, TX
22
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96
Posts

First Investment Deal SFH

Jonathan G.
Pro Member
  • Investor
  • Tyler, TX
Posted Jul 31 2014, 15:26

Hello everyone, I am possibly looking into my first deal.  I am extremely new so please take it easy on me ;-).  I by no means think I have it all together or want to.  I would greatly appreciate any info as well as perspective when looking at this deal, thus why I am putting myself out here with such little knowledge.  

I am using the Rental Properties Investment calculator on BP, however I am finding out that I still have quite a bit of a learning curve to understand all that goes into my first deal.  One thing I know for sure is that once I master this process I will be in a great place.  I do not want to get wrapped up in emotion but numbers.  I just need some guidance on figuring out that formula to the best of my ability.  Any help would be much appreciated!

1) So starting out on the calculator, I am not to sure what my area's average cap rate is.  How do I go about figuring that out?

I am looking at a property that was recently built within the last 7 years and if all the numbers add up correctly, I would probably negotiate a price of about $167,000-$170,000.  I have spoken with a realtor about what the possible rent could be for this property and she checked with a management company that told her between $1,400 to $1,450.  

2) Is there any other due diligence that I can do to make sure this number is correct?  I have checked craisglist but their are not many on there to compare rents with.

Property taxes are $2,900

I would be putting down 20% and am looking into a 30 year fixed around 5.2% to 5.5%.

I am assuming that electricity, water, sewer and garbage would all be paid by the tenant. I am checking to verify that there are no HOA's but I believe there are not.

3) What would be the best way to figure out what insurance would be on the house?  Is there a particular formula to calculate that or do I need to call an insurance company?

I picked about 8% for a vacancy rate.  I am in a very desirable area and school district so I believe it may be a little high but however I would rather be safe then sorry.

4) Not sure what % to chose for Repairs and Maintenance since it is a fairly new house? What would you suggest?

5) What % should I use for Capital Expenditures, this I really have no idea about.

I have added 10% for Property Management even though I will most likely manage this one but I still want that in the budget because when I decide to change or scale up I want that already apart of it.

6) When it comes to future calculations, what is a safe rule of thumb for Income Increases per year (%), Property Value Increases per year (%), and Expenses Increases per year?

Please feel free to add anything else I may be missing or need to consider.  Again I appreciate all of you working with me to help me understand everything that goes into this process.  I hope that I learn to develop my skills in the future I will be able to add value back to BP as well.  

I AM ALL EARS!!!

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