Help! Are My Assumptions Reasonable?
Hi All- Newbie investor here, searching for my first rental property. This has been a goal of mine for many years and I'm finally in a place to pull the trigger.
I live in So. Cal and (though sparse) I'm able to find a number of deals right on the MLS that cash flow reasonably well based on my model- to the tune of 9% - 17% cash on cash (levered up from 5% - 8% cap). I've heard over and over again that getting those kinds of returns in CA (absent appreciation) is pretty uncommon.
SO... What am I missing? Are those returns realistic? I feel like I must be missing something. I'm using the below to arrive at my monthly net cash flow number:
- +Rental Income
- (-) Vacancy Assumption = 8% of rent
- (-) Mgmt Fees = 10% of rent
- (-) Mortgage Interest Expense = 4% rate
- (-) HOAs = Actual
- (-) Insurance = 6.8% of annual rent
- (-) Property Tax = Actual per MLS
- (-) Repair/Maint = 10% of rent
- (-) Gardner = $50/mo
- = Net Rental Income
- (-) Mortgage Principal Paydown
- =Net Monthly Cash Flow
Any input is very much appreciated. Thanks!
Some Geography Context: I'm looking in San Bernadino, Apple Valley, San Jacinto, Hemet, Adelanto, Riverside, LA, and other low-price areas. I am also interested in out of state investing, but I'll leave those questions/comments for another post.