Specialist · New York City, NY · Member since 2019 · 399 posts · 168 votes
6y
@Roberto Lopez Based on the report, a few things are not properly set up. A few comments:
1. Your overall rent expectation is low compared to your purchase price (see the 2% / 1% rule)
2. your monthly expenses are through the roof. If you look at the breakdown, you can see that you put your annual property taxes as a monthly expense, so you should change that.
3. Estimates for Vacancy, capex, Management, Repairs at 2% are way too low. Property management usually costs between 7%-10%. Capex is usually set around 8-10% (check BP's blog, they have multiple articles about that). Vacancy at 2% means your property is empty only one week a year, that might be a stretch too.
4. How did you come up with an ARV of $250k for a house purchased for $190k with only $5k of repair work? Unless you're making a very good deal at purchase, it's unlikely that your property would appreciate so much post acquisition.
Rental Property Investor · Wake Forest, NC · Member since 2017 · 128 posts · 131 votes
6y
But with a $1000/month rental, and an $850 P&I, you’re going to be cash negative if you factor in your need to save for cap ex, maintenance, vacancy, and PM (usually 8-12%) of monthly rent.
Specialist · New York City, NY · Member since 2019 · 399 posts · 168 votes
6y
@Roberto Lopez Based on the report, a few things are not properly set up. A few comments:
1. Your overall rent expectation is low compared to your purchase price (see the 2% / 1% rule)
2. your monthly expenses are through the roof. If you look at the breakdown, you can see that you put your annual property taxes as a monthly expense, so you should change that.
3. Estimates for Vacancy, capex, Management, Repairs at 2% are way too low. Property management usually costs between 7%-10%. Capex is usually set around 8-10% (check BP's blog, they have multiple articles about that). Vacancy at 2% means your property is empty only one week a year, that might be a stretch too.
4. How did you come up with an ARV of $250k for a house purchased for $190k with only $5k of repair work? Unless you're making a very good deal at purchase, it's unlikely that your property would appreciate so much post acquisition.
Investor · South Bend · Member since 2020 · 14 posts · 12 votes
6y
@Roberto Lopez
Doesn’t seem like a good deal at all.
P&I, taxes, and insurance aren’t even covered by rent. Take in to consideration PM, repairs, Cap and you are paying out of pocket every month for someone else to live there.
Lender · Vancouver, WA · Member since 2015 · 482 posts · 316 votes
6y
@Roberto Lopez
Ok, as I look at this I am thinking, "Hopefully this person is looking at the property with their own eyeballs." Please remember, any deal has to make sense when you buy it, first. Realtors write descriptions to get houses to sell, that doesn't mean it is a good deal based on your circumstances. In my opinion, based on basic numbers displayed it's not a good deal unless you start cash flowing on 13th month. In my market, that can be hard bit still doable (but I usually consider the 1st year a bust). I don't fuss with all the fancy calculations, I look at it from debt-service-coverage with ratio. I had once heard 1.4 was good. So when I look at a property, I look at it with how much it should rent for based on my PITI+PMI. Everything else is fluff that makes me feel better/worse. I noticed in this case that will use a down of 3.5%, so you're house-hacking. Did I miss PMI? That will also add considerably to closing costs. Something you might want to review is Fannie Mae Eligibility Matrix, very helpful. Now if you're buying with 20% down and then rehabbing to increase rent-flow to say $1,500, then it might be good. That's another thing, it's a rental, if it generates $900 in rent now, why would you spend more than $1,200 in rehab if it only is going to rent for $1,000? Remember this is a business, you can't stay afloat without having positive cash flow.
Glen Cove, NY · Member since 2014 · 21 posts · 5 votes
6y
hi, matt I thank you for your comment that's why I'm talking to all of you guys because this is another way to educate myself. You all masters in this and I'm a newbie even if I'm 52 I feel like a baby learning to walk.
Rental Property Investor · Dallas, TX · Member since 2019 · 30 posts · 12 votes
6y
@Roberto Lopez I'm glad you've decided to start your real estate journey, as with any new endeavor its best to start with educating yourself before taking the plunge. Analyzing deals is one of the fundaments of real estate investing so its good you're already practicing and posting your report here for those with more experience to review and provide feedback.
With regards to the deal, I wouldn't do it. 2% for each expense is way too low, it almost seems you're pushing really hard make the deal work for you. I typically do 5% for each and 12% for PM fees on my BRRRRs and thats because the house has been completely renovated before renting it out so everything is new with pipes and electrical checked during that process. Otherwise, I'd be more conservative with 7 -12% across the board.
In addition, 1k for a 190k property is too low, if your market supports it can you rent by the room? that could help being more income but unless you can double that rent this is not a deal.
My advice is as you analyze your deals and create reports, look at the numbers and understand what each means. Your report is pretty detailed so try to understand what each section is telling you about the deal and don't force it, especially for your first deal.
I truly wish you well on your real estate investment journey and good luck!