Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Jodi Tommerdahl alright so first thing is closing costs. You currently have them as zero but it will cost you 5-7k I’m guessing to close.
Secondly, your interest rate is likely low. Probably closer to 5.5-5.625 percent, maybe even higher since it’s multifamily.
Did you get a quote for that insurance or are you just guessing? You should get a quote I’m guessing your insurance is low. In Dallas you get hail and high winds and the insurance tends to be higher. Plus the value here is much greater than what I pay for my 75k single family.
I pay about 40 a month for that insurance which is low/good deal so I’m guessing this property would be more like 150-200 a month.
So once you add the closing costs and likely higher insurance costs this is a poor deal. Your return is around 4-6 percent.
If you live in Dallas and want to continue to live there long term I’d invest in a out of state market that is relatively close such as Little Rock or Memphis. If you have 80k to put down that’ll buy you 4-6 properties in ether market or a small apartment building.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Jodi Tommerdahl alright so first thing is closing costs. You currently have them as zero but it will cost you 5-7k I’m guessing to close.
Secondly, your interest rate is likely low. Probably closer to 5.5-5.625 percent, maybe even higher since it’s multifamily.
Did you get a quote for that insurance or are you just guessing? You should get a quote I’m guessing your insurance is low. In Dallas you get hail and high winds and the insurance tends to be higher. Plus the value here is much greater than what I pay for my 75k single family.
I pay about 40 a month for that insurance which is low/good deal so I’m guessing this property would be more like 150-200 a month.
So once you add the closing costs and likely higher insurance costs this is a poor deal. Your return is around 4-6 percent.
If you live in Dallas and want to continue to live there long term I’d invest in a out of state market that is relatively close such as Little Rock or Memphis. If you have 80k to put down that’ll buy you 4-6 properties in ether market or a small apartment building.
Rental Property Investor · Dallas, TX · Member since 2014 · 25 posts · 13 votes
8y
Thanks a lot Caleb. I have been looking at some out-of-state properties but am wondering how they will be affected when there’s an economic downturn compared to DFW which weathers upheaval pretty well. Do you have any thoughts?
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
@Jodi Tommerdahl so I’ve invested in Memphis and Cleveland. Memphis is closer to you so I’ll just stick with that one for now.
During the last recession in 2008-09, values in Memphis dropped around 30 percent, which is an issue. However, rents dropped 5 peecent snd vacancies doubled (from 1 month to 2 months). So most buy and hold landlords were ok
Austin, TX · Member since 2018 · 51 posts · 48 votes
8y
Your property taxes may be a little low. Based on various tax rates of jurisdictions in Tarrant Co and an appraised value of let's say $300k, monthly property taxes would be about $675/month.
Rental Property Investor · Dallas, TX · Member since 2012 · 502 posts · 263 votes
8y
@Jodi Tommerdahl Interest rate is low for an investment property.
Insurance is probably too low.
Property taxes are low - counties have been extremely aggressive raising property tax assessments. I would assume they will re-assess the property at the purchase price the year after you buy it. I think Tarrant County is around 2.8% tax rate, but you can verify with Tarrant CAD.
I would budget more for repairs/capex. Depends on the age and condition of the property, but realistically long term, between repairs and capex, you are looking at probably closer to 15%.
Management seems high, unless you are including the cost of finding/placing tenants as well. If so, good for you. Nobody ever seems to account for that cost.
Chicago, IL · Member since 2017 · 16 posts · 8 votes
8y
As mentioned above your numbers are off, and off in a not so good way. However your management fee is high, you could always self manage and potentially double your profit. Also im not sure how it is in your state but here in Chicago you can't do multi family lending longer than 25 years and you have 30 years which could eat at your income.
Personally I would not invest close to 90k after closing costs, inspections, etc. for a $400 a month return because based off those numbers in order to recoup you initial investment it would take roughly 18.75 years to make that money back, assuming you don't refi.
Also in my experience for that return on a C property often requires alot more repair and maintenance than you have listed