Rental Portfolio Goal and Structure Feedback

4 Replies

Hi All!

I'm interested in getting your feedback on my objectives and how I plan to achieve them.  I'll be terse.

Goal: Generate inflation adjusted free cashflow of $8k per month in 10 years. Minimum goal is $5k per month in 15 years.

Portfolio Design: Acquire multiple properties that generate rents high enough to amortize loans in 10-15 years and cover all costs.

Example: $100k 3/2 property; PITI $733; Allowances $196 ==> Minimum Rent $903 (15yr amortization) Target Rent $1122 (10yr amortization). I am finding properties that meet these requirements. To meet the optimal target ($8k/10yrs) I would need about 7 of these properties.

I'm looking forward to your feedback and creative ideas based on your experience.  

Thanks!

G

Originally posted by @Greg P. :

Hi All!

I'm interested in getting your feedback on my objectives and how I plan to achieve them.  I'll be terse.

Goal: Generate inflation adjusted free cashflow of $8k per month in 10 years. Minimum goal is $5k per month in 15 years.

Portfolio Design: Acquire multiple properties that generate rents high enough to amortize loans in 10-15 years and cover all costs.

Example: $100k 3/2 property; PITI $733; Allowances $196 ==> Minimum Rent $903 (15yr amortization) Target Rent $1122 (10yr amortization). I am finding properties that meet these requirements. To meet the optimal target ($8k/10yrs) I would need about 7 of these properties.

I'm looking forward to your feedback and creative ideas based on your experience.  

Thanks!

G

 Hate to be a debbie downer but not sure the numbers make sense.  733 piti on 100k 15yr am seems a bit low.  What are you factoring for interest rate? Down payment? Furthermore i'm assuming the allowances are for vacancy, cap exp, operating exp, etc? if so that also seems quite low. try utilizing the 50% rule & please expand to get the best answer. 

Rob Anderson, Anderson Property Management LLC | [email protected]

Originally posted by @Rob Anderson :

 Hate to be a debbie downer but not sure the numbers make sense.  733 piti on 100k 15yr am seems a bit low.  What are you factoring for interest rate? Down payment? 

Thanks for the quick response!  :)

The PITI is confirmed via my mortgage lender for a specific property I'm considering. 20% down using a 15 year fixed rate of 3.75.

I'm allocating 10% for maintenance and 7% vacancy.  The numbers for this particular property are low because the previous owner occupant replaced the roof, HVAC and flooring all within the last 5 years.  Vacancy is low because of the location (visible and central).  I will self manage.

Originally posted by @Greg P. :
Originally posted by @Rob Anderson:

 Hate to be a debbie downer but not sure the numbers make sense.  733 piti on 100k 15yr am seems a bit low.  What are you factoring for interest rate? Down payment? 

Thanks for the quick response!  :)

The PITI is confirmed via my mortgage lender for a specific property I'm considering. 20% down using a 15 year fixed rate of 3.75.

I'm allocating 10% for maintenance and 7% vacancy.  The numbers for this particular property are low because the previous owner occupant replaced the roof, HVAC and flooring all within the last 5 years.  Vacancy is low because of the location (visible and central).  I will self manage.

 Ok, That 20% down and VERY good fixed rate. now I can see the 733... 3.75 on a non-occupied investment property. I need to know your lender!!! When purchasing a property and crunching numbers I tend to run a little bit of a different style. I like to know worse case scenario. I dont plan, and never have had a 10% Vacancy but thats what i Allocate. I manage my own as well right now, but, if i purchase enough and it becomes overwhelming i want to be in a spot i can turn them over and still be in the black. @brandon turner and @Joshua Dorkin  talk about this in a podcast. I believe brandon said he wishes he would have implemented this earlier on in his career. The numbers overall look pretty good. If i were you i would look at anticipating higher cap exp even if you believe the property is in good condition, but just my 2cents. Best of luck & keep us posted!!

Rob Anderson, Anderson Property Management LLC | [email protected]

@Rob Thanks for the detailed feedback.  I am going to start building in a buffer for management and, as you suggested, additional cap ex funding. 

I viewed a portfolio of 6 SFRs today, 3 diamonds in the ruff and 2 hell holes and 1 small gem.  The numbers work (really well) but the two hell holes really scare me.  The 'hoods are on the edge of the gentrified area.  The other challenge is that bids are due on Monday and the owner will give preference to bids for the whole portfolio.  What an adventure. :)