Deal Analysis - Too conservative?

Question

I have been running the numbers on some deals, mostly 2-4 unit properties, and I am finding that nothing on the MLS is even coming close to cash flowing at the list price. I am sure part of it is just how the market is, but I want to check to see if the numbers I am using are right in the first place.

I use 8.33% for vacancy (1 month per year). 5% for maintenance. 5% for management, even though I self manage. 10% for Cap Ex. And then local tax rates and standard insurance amounts as well.

Do these make sense? Should any of these be adjusted at all based on your experience?

Aaron Zimmerman · Answer

Repairs and capex should be adjusted on age of property. I'd say up to 10% for each could make sense

Michael K Gallagher · Answer

@Nate F.  generally if you are looking for a house hack for me it has to meet two requirements:

1) can you generally handle the mortgage payment on your own? or in the case of a 4 unit at say 50% vacancy, basically making sure 1 missed month of rent ins't going to sink you type thing.

2) does is better your financial position in the short term and/or in the long term?

If its a "traditional rental"

Yes generally the deals on the MLS you are going to have to "make offers" and wheel and deal to an extent.  Unless something is agressivley priced there is usually a negation that is happening.