Best way to calculate if a property is a good investment?

3 Replies

Hello all! I am looking to buy my first property this coming up year. Very excited! My husband and I are looking to start off with a duplex near the Harrisburg, PA area, but I’m trying to get a head start. I have looked into a few ways to analyze deals, but not too sure what seems to be the most popular choice. I am naturally trying to discover some formula to see what the ROI would be so that I can calculate (if everything were to go well) how long/far off are we from being financially free (will be working on 5 and 10 year goals soon). Would love some input so that I can begin to analyze one deal each week so that later in the year when we go to buy, I will have a decent idea what I am doing. Thanks for all your help?

I would second what @Bob Langworthy said.  Also, in the meantime I would HIGHLY recommend you check out some of the local meetups.  There are some great ones in Harrisburg, Camp Hill, York, Lancaster, etc.  Download the 'meetup' app and search real estate and all the local one should show up.  Also, start walking properties too so that you can get a feel for things and that will help you pick a more accurate number for cap ex/repairs/rents and then when you start using the calculators you have a pretty good idea what things will rent for in certain areas and helps you understand your market.  If you're not sure what you're looking at take a contractor or someone that does.  

For me, I use 8% for vacancy (8%= 1/12 = 1 month of vacancy and I always do better than this) and 10% for management (I self manage), and anywhere from 5-10% for cap ex and 5-10% for repairs depending on age/condition/etc of property.  This is after factoring in any other utilities/insurance/taxes.  These are rather conservative numbers, but if I can hit 100-150 a door a full asking price I'm looking much closer at the deal.

Let me know if you have any further questions or I can be of help in anyway.  I'm very familiar with Harrisburg and many surrounding areas.