Providence, RI · Member since 2015 · 6 posts · 0 votes
Hello Everyone,
I'm very close to closing on my first deal for a SF rental property in Providence, Rhode Island - 4 rooms, 1.5 bath. I've listed my calculations below and am hoping that some of you could chime in to confirm my results and let me know if I may be overlooking anything. Thank you in advance!
Hey @Jason Hirko, can you just write out a sample one for me? Or just take what Casey had and modify it?
Sure. So Casey is cashflowing $570/month or $6,840 a year. Figure the first year of his mortgage he paid $3000 towards principle. I'd add that to his cash, $9840, then divde into $252,500. Or 3.9% annual return. That's just how'd I'd Look at it.
I'm curious about that too @Jason Hirko, how do you typically factor that in?
If I were going to calculate total return, I'd take cashflow and add back the amount that went to principle and divide that by my investment, but I'm curious to see how they came up with a 14% total return.
Hey @Jason Hirko, can you just write out a sample one for me? Or just take what Casey had and modify it?
Sure. So Casey is cashflowing $570/month or $6,840 a year. Figure the first year of his mortgage he paid $3000 towards principle. I'd add that to his cash, $9840, then divde into $252,500. Or 3.9% annual return. That's just how'd I'd Look at it.
Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
10y
Do you not have home warranty on appliances? If you haven't considered having one, you should. Appliances break and home insurance doesn't cover it. . For a small deductible you can get your appliances repaired or replaced (if the damage is beyond repair). Replacing HVAC or Water Heater can run into 1000s of dollars, and quickly bring you negative cash flow.
Also, why are you paying water/sewer. If paying for the utilities is in your contract, are you not paying Power and Gas. Just water/sewer? Typically, tenants are the ones who pay for utilities. I was wondering if you missed out something there.
Additionally, does the property have HOA? Not all properties have HOA. Some do; some don't. If you have HOA your Income statement needs to reflect that.
Investor · Providence, RI · Member since 2016 · 138 posts · 40 votes
10y
Funny you mention that @Chinmay J., I was just talking with my agent and he was pushing a 13 month warranty on me. It's $495 all in. I hadn't heard anything about that and it didn't seem like something I would want so I kind of poo pooed it but maybe I should reconsider.
I also know him decently well, he is one of my best clients for my full-time gig so I don't think he'd do me dirty.
Investor · Northern, VA · Member since 2016 · 1k+ posts · 904 votes
10y
@Stephen Torti - No. In fact if a Realtor doesn't mentioned it, he is either too new (in which case he should be working with someone more experienced) or just not a good realtor. Its really a no brainer, but read the details of the policy carefully to see what is covered and what is not. A while back sewer ejector pump in one of my properties went bad, and it was not covered. Their premium policy covered it. I only had basic. Its really a life saver.
So you're adding in the equity as positive cash flow, got it better now I think. I just had a second to really think about it.
Right, because you're gaining that value as well as cash. A lot of people make the mistake of adding in their whole payment, but of course the interest brings you no tangible value. As you get deeper into the loan, that return will go up automatically simply as a function of the amount of your payment paid towards principal increases through the life of the loan.
Investor · Providence, RI · Member since 2016 · 5 posts · 4 votes
10y
Based on what I have seen with my units in Providence, the monthly costs look low.
Providence’s owner-occupied property tax rate $19.25 per $1,000 of assessed value and its non-owner-occupied rate is $33.10 per $1,000. In my experience, the city has been diligent in keeping assessed values not far from market values. If you are renting out the property, you could pay around $8275 in annual taxes ($690 per month).
As mentioned above, you may or may not need an HOA fee.
As mentioned above, I would use an interest rate in the 4.75% range.
I assume tenants will pay electric and gas. Otherwise, add in about $150 for utilities.
Based on my experience, the repair cost estimates look ok. Like most in Providence, my properties are very old, but have been renovated many times over the years and have been well kept. While it varies wildly year-to-year and month-to-month, the $260 looks reasonable based on what I have seen.