Figures you use for the Rental Calculator?

Question

Hello BP community,

I just recently joined the site and have to say I've been learning a lot from all your posts and excited to meet some fellow like minded people.

I just had a question regarding how some of you enter #'s in the BP Rental Calculator.  Specifically in the Vacancy, Repairs / Maintenance and CapEx fields.  Is there a standard number (%) you guys go by on every deal?

Thank you in advance.Chris

Joe Villeneuve · Answer

The math works, however you are lowering your standards/criteria for a good deal.  You would be rationalizing...and that can be very expensive.

Based on this logic, I would need to start out with an actual before the deduction 100 higher to reach so that I would stay above my 300 minimum.

Brent Coombs · Answer

@Joe Villeneuve, might not @Christopher Suh (and others) achieve the same result by allowing the theoretical cap ex etc percentages in the first instance, but having their good-deal criteria at just $200/m NCF? (After which, they will enjoy $300/m for much of the time - until those cap ex punches to the gut)...

Christopher Suh · Answer

Never thought of it like that.  Thanks for the insight @Joe Villeneuve .

Joe Villeneuve · Answer

0%

Why?  Do the math in the real world.  Taking cash out of the rent each month accomplished nothing practical, but it will give you a potential false negative on a property that convinces you NOT to buy a property you probably should have.

Criteria: to buy property is at least $300/month NCF

Here's the math on one of my typical properties:1000       Rent  275       Tax/Insurance  100       Property Manager  300       Mortgage Payment on REFI  300       NCF/M...I buy the property-100       10% for Capex, reserves, vacancy, etc...  200       New NCF/M...I don't buy the property, but I should have

Yes, I still have to cover the Capex, vacancy, etc...., but what good will taking out 10% a month (100 = 1200/year) do for me?  What am I going to be able to cover with 1200...and that won't happen until a full year is up?

I prefer to cover it proactively when I refi the property right after I rehab it with the "cash out" portion of the refi.  Here is how I do it, using the above typical property:

76,000        ARV57,000        75% of ARV = REFI loan50,000        Total cost = buy, rehab, etc...  7,000        Cash Out at REFI...which is where my Cash Reserve comes from.