First Time Home Buyer of Multi-Family Property Help
Member since 2022 · 5 posts · 3 votes
First Time Home Buyer of Multi-Family Property Help
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Hamp Lee IIIPro Member
Real Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votesCan you share your info from the rental property calculator here? Thanks.
8 Replies
- 3yHamp Lee IIIPro MemberReal Estate Agent · San Antonio, TX · Member since 2019 · 1k+ posts · 832 votes
Can you share your info from the rental property calculator here? Thanks.
- 3yTanner PileBusiness MemberReal Estate Broker · Colorado Springs, CO · Member since 2019 · 389 posts · 326 votes
I typically like to see a few hundred dollars in cash flow after moving out of a house hack. This would be after accommodating for all expenses and reserves.
Tanner Pile4.930 Reviews - Rental Property Investor · Essex County, NJ · Member since 2020 · 16 posts · 6 votes3y
Great job on being under contract!!
Those numbers could work depending on your expenses for the property. Those taxes seem a bit low for northern NJ, so I'd be curious to know where the property is located. Additionally, are the utilities separately metered (gas and electric)? If so, the tenants cover utilities, but if not, you may have to. Just keep those things in mind. You should also call up an insurance broker and see what insurance might cost you ($120 might be a good enough assumption for now).
Once you have all of that, add up the monthly mortgage, taxes, and insurance, add any utilities you may need to cover (water at a minimum is typical in NJ, but maybe also lawnmowing and snow shoveling, if you don't write those into the leases). Then add 10-15% of the rent and save that for maintenance, capex, and vacancies (another 5% for property management if you're not self managing but even if you are, it gives you the option to hire it out in the future). And then compare that number to the $2,500 in rent you're estimating currently.
Are you cash flowing at all? Are you breaking even or close? Even if you're not cash flowing right now, rents tend to go up with inflation but mortgages are typically fixed (what's yours?). At the very least if you're house hacking, the rental income will cover some of your own housing costs which is great.
Bottom line is that the deal being a good one really depends on a number of quantifiable variables along with what you're willing to accept for your specific situation.
If you're willing to share, give us those numbers I mention here and we may be able to help you out a bit more!
- Member since 2022 · 5 posts · 3 votes3yThanks for the great info! Utilities are separate, my home insurance quote is $105 a month, water is on a well. Adding up the numbers I get to about $2250 a month. So $250 cash flow a month once I move out. I was trying to base it off the 1-2% rule but the numbers are way off. I’m also hoping that if I do get it, I could re-finance in a year or two to get a better rate. Current mortgage rates in NJ are 6.5-7%!
Quote from @Jean Carlo Vilalta:
Great job on being under contract!!
Those numbers could work depending on your expenses for the property. Those taxes seem a bit low for northern NJ, so I'd be curious to know where the property is located. Additionally, are the utilities separately metered (gas and electric)? If so, the tenants cover utilities, but if not, you may have to. Just keep those things in mind. You should also call up an insurance broker and see what insurance might cost you ($120 might be a good enough assumption for now).
Once you have all of that, add up the monthly mortgage, taxes, and insurance, add any utilities you may need to cover (water at a minimum is typical in NJ, but maybe also lawnmowing and snow shoveling, if you don't write those into the leases). Then add 10-15% of the rent and save that for maintenance, capex, and vacancies (another 5% for property management if you're not self managing but even if you are, it gives you the option to hire it out in the future). And then compare that number to the $2,500 in rent you're estimating currently.
Are you cash flowing at all? Are you breaking even or close? Even if you're not cash flowing right now, rents tend to go up with inflation but mortgages are typically fixed (what's yours?). At the very least if you're house hacking, the rental income will cover some of your own housing costs which is great.
Bottom line is that the deal being a good one really depends on a number of quantifiable variables along with what you're willing to accept for your specific situation.
If you're willing to share, give us those numbers I mention here and we may be able to help you out a bit more!
- Rental Property Investor · Essex County, NJ · Member since 2020 · 16 posts · 6 votes3y
Quote from @Adrian Jinks:
Thanks for the great info! Utilities are separate, my home insurance quote is $105 a month, water is on a well. Adding up the numbers I get to about $2250 a month. So $250 cash flow a month once I move out. I was trying to base it off the 1-2% rule but the numbers are way off. I’m also hoping that if I do get it, I could re-finance in a year or two to get a better rate. Current mortgage rates in NJ are 6.5-7%!Quote from @Jean Carlo Vilalta:
Great job on being under contract!!
Those numbers could work depending on your expenses for the property. Those taxes seem a bit low for northern NJ, so I'd be curious to know where the property is located. Additionally, are the utilities separately metered (gas and electric)? If so, the tenants cover utilities, but if not, you may have to. Just keep those things in mind. You should also call up an insurance broker and see what insurance might cost you ($120 might be a good enough assumption for now).
Once you have all of that, add up the monthly mortgage, taxes, and insurance, add any utilities you may need to cover (water at a minimum is typical in NJ, but maybe also lawnmowing and snow shoveling, if you don't write those into the leases). Then add 10-15% of the rent and save that for maintenance, capex, and vacancies (another 5% for property management if you're not self managing but even if you are, it gives you the option to hire it out in the future). And then compare that number to the $2,500 in rent you're estimating currently.
Are you cash flowing at all? Are you breaking even or close? Even if you're not cash flowing right now, rents tend to go up with inflation but mortgages are typically fixed (what's yours?). At the very least if you're house hacking, the rental income will cover some of your own housing costs which is great.
Bottom line is that the deal being a good one really depends on a number of quantifiable variables along with what you're willing to accept for your specific situation.
If you're willing to share, give us those numbers I mention here and we may be able to help you out a bit more!
Cash flowing $250 off the bat is not bad at all! The 1% rule won't work as is in this NJ market, and even so, you're pretty close to it with those numbers. Look at how much you're cash flowing and how much you're saving relative to having to pay your own rent or the entire mortgage. House hacking will allow you to save more aggressively to better prepare you for your next investment. Great job!
- Real Estate Agent · Member since 2018 · 459 posts · 414 votes3y
Quote from @Adrian Jinks:
Hi Everyone,
I am currently under attorney review on my first property in Northern New Jersey. The purchase price is 270k, it's a 3 bedroom, two-unit property. with 2 bedrooms up and 1 down. Property taxes are 4,800 annually. The projected rental income after I move out of the one unit in a year will be between $2,500 and $2,600 a month in total. I have tried using a few of the calculators on here to see if it's a smart purchase but I can't quite get them to work. I would appreciate anyone's insight if this is a good purchase or not. Thank you.
Congratulations! This is a great opportunity for you.
Once you move out, it really depends on what you're wanting to accomplish and how this property is going to serve you best. Even if it broke even, it doesn't necessarily make it a bad deal if it's going to appreciate well over time. Cash flow is really nice and a great reward, but not having great cash flow doesn't automatically make this a bad deal.
You have to consider the savings rate you'll have once you are moved in to one of the units. This could be your base hit that gets you that home run deal because you were able to save massively on your living expenses and scale.
If you need at least $100/door, then sure, go for it. I wouldn't use the 1% rule as a metric of whether a property is a good deal or not. It's a generic rule some people can use in their market but built based on their goals and their market. You are in a different market, you have different goals, and a wise investor is one that can pivot and adjust and plays with the cards they are dealt with. Your metrics are up to you to determine. It's a balance between sticking to your guns and not budging and understanding if your "guns you're sticking to" are realistic or if you need to pull the trigger on a deal just to get a base hit to set you up for a great deal.
Throw your calculations on here and we'd love to take a look. We don't know how much you're putting down, projected rehab costs, interest rates, etc. All of this is pertinent.
Lastly, you need to factor in a maintenance and repair cost for your well. Having a well is awesome until the pump goes out. And that can cost you a lot. Have a reserve set aside and maintain it well and you should be fine.
Hope that helps!
- 3yRyan ThomsonBusiness MemberReal Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
I would consider your net worth ROI. What I mean by this is considering how much your down payment returns to your net worth (appreciation, loan paydown, tax benefits). Cashflow is hard to find right now and trying to find it may mean you miss out on some great long term returns. When you include all of those, the ROI is better than most alternatives outside of real estate.
Important to note: you need to be able to afford the property comfortably if you are not cash flowing.
The Assumable Guy544 Reviews @Adrian Jinks - thanks ...what are you planning to put down and what interest rate are you using for your loan?
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