Rental Property Investor · Lakewood, OH · Member since 2020 · 14 posts · 9 votes
Hi All,
I think I've found a deal on a SFH in North Carolina. Would love a second set of eyes on the math to see if anyone can poke holes in it for any considerations I'm missing for a buy & hold strategy.
Purchase Price: $70,000
Mortgage Terms: 20% down ($14,000) @ 4.5% interest
Closing Costs: $3,000
Income
Average Rent for comps: $850/ month ($10,200 annual)
Assumptions
Vacancy: 6.5%
Management Fees: 10%
Expenses
Mortgage: $283/month
Vacancy: $55/month
Management: $79/month
Property Tax: $83/month
Other Misc Expense (including insurance): $250/month
I have this deal cash flowing ~ $100/month. Given that I'm planning to hold this property for a few years with cash flow being my primary goal, can anyone take a look and let me know their thoughts?
I think I've found a deal on a SFH in North Carolina. Would love a second set of eyes on the math to see if anyone can poke holes in it for any considerations I'm missing for a buy & hold strategy.
Purchase Price: $70,000
Mortgage Terms: 20% down ($14,000) @ 4.5% interest
Closing Costs: $3,000
Income
Average Rent for comps: $850/ month ($10,200 annual)
Assumptions
Vacancy: 6.5%
Management Fees: 10%
Expenses
Mortgage: $283/month
Vacancy: $55/month
Management: $79/month
Property Tax: $83/month
Other Misc Expense (including insurance): $250/month
I have this deal cash flowing ~ $100/month. Given that I'm planning to hold this property for a few years with cash flow being my primary goal, can anyone take a look and let me know their thoughts?
Hey Brian, what about repairs & maintenance and capital expenditures? If it's a $70,000 house on the east side of the U.S. I would bet it's fairly old as well, so I would be budgeting 8-10% a month for each of those as well. What about landscaping? Are you cutting the grass? It certainly doesn't look like that's encompassed in your monthly management fee.
Do you have any extra cash on hand? If the furnace goes out in month one will you be able to afford it (this just happened to me)?
I think I've found a deal on a SFH in North Carolina. Would love a second set of eyes on the math to see if anyone can poke holes in it for any considerations I'm missing for a buy & hold strategy.
Purchase Price: $70,000
Mortgage Terms: 20% down ($14,000) @ 4.5% interest
Closing Costs: $3,000
Income
Average Rent for comps: $850/ month ($10,200 annual)
Assumptions
Vacancy: 6.5%
Management Fees: 10%
Expenses
Mortgage: $283/month
Vacancy: $55/month
Management: $79/month
Property Tax: $83/month
Other Misc Expense (including insurance): $250/month
I have this deal cash flowing ~ $100/month. Given that I'm planning to hold this property for a few years with cash flow being my primary goal, can anyone take a look and let me know their thoughts?
Hey Brian, what about repairs & maintenance and capital expenditures? If it's a $70,000 house on the east side of the U.S. I would bet it's fairly old as well, so I would be budgeting 8-10% a month for each of those as well. What about landscaping? Are you cutting the grass? It certainly doesn't look like that's encompassed in your monthly management fee.
Do you have any extra cash on hand? If the furnace goes out in month one will you be able to afford it (this just happened to me)?
-Repairs and Maintenence are factored into the expenses in the OP, but I added an additional 8-10%/month for CapX which I definitely may have overlooked. The property inspection has indicated the kitchen needs some repairs, so budgeting about $8,000 for that once the current tenant's lease is up (if they choose to move out).
- Built in 1974, so added more for CapX per your suggestion.
- Tenant would be responsible for Electric, Garbage, Gas, Landscaping, PestControl, Water.
- My fiance and I do have a fair amount of cash on hand, about another 50K that could be tapped into if everything went to sh*t.
With this additional info, let me know your thoughts. Still looking at positive cash flow (less than $100 now) and I feel like I'm being responsibly cautious with the estimates.
Rental Property Investor · Colorado Springs, CO · Member since 2018 · 682 posts · 729 votes
6y
@Brian Boodoosingh Well it really depends on what your long-term goals are and your current situation. If you and your fiance are both high earners, who enjoy their jobs and plan on staying in NY while building a rental portfolio elsewhere, then buying turnkey houses like this might make sense. On the other hand, if you're trying to leave your jobs in a matter of years and live off of rental income you will likely have to go a different route.
That's a very small cash on cash return and I personally would want more cash flow, especially since the house is so cheap and your amortization/appreciation will be fairly low. I bet even going the turn key model you could get a better deal.
Did you use the BP rent analyzer? It's excellent for the spreadsheet part of the assessment. A cash flow of $100/month seems really low unless there are other strategic pieces to the deal (high confidence in appreciation, tax benefits, plans for other use of the property in the future).
Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
6y
@Brian Boodoosingh it depends on your personal goals but personally, I think $100/mth cash flow is pretty lean. Based on your assumptions, that's about a 7% CoC return. On the other hand, $250/mth is pretty high for unidentified miscellaneous expenses. You might want to nail those down more precisely and get a better estimate of expenses.