I have used the website calculator to analyze the property, but I am struggling with the following questions:
Typical Cap Rate for your Area (%)? I do not understand what this is asking.
Struggling with predictive numbers…
Vacancy Rate. 3-10% suggested in calculator.
How do you estimate for vacancy?
How does one calculate vacancy %, say 2 months of vacancy over 3 years? 2/36=5.6% vacancy?
Repairs and Maintenance. 5-15% suggested in calculator.
I was planning on including a base amount each month for repairs. How much is reasonable?
For appliances, I figure out age, estimate time left to replace an factor in the cost for appliances.
Really struggling with future Assumptions. How do you predict these %?
Income increases per year?
Property value increases per year?
Expenses increases per year?
If you aren't sure about Vacancy, Maintenance or Property Management go with 10%. It's better to overestimate then underestimate.
10% will cover you for about a month or so on vacancy. That will really depend on your target area. If the area isn't so great or there are many rentals in town unrented the vacancy rate could be higher. I like to check craigslist and a few other sites to see what is out there. If you see the same properties listed a month later either their rent is too high, location isn't ideal, or there just isn't a demand for housing there.
The last 3 things you are kind of guessing unless you have some hard data from the city about property values or growth. 1 or 2% is probably ideal in most cases. Expenses could vary depending on how old the property is and what condition the inside is in.
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