All Forum Posts by: Jacob Carter

@Edward B. Thanks for pointing me to the DSCR. I will look into it. When talking to the bank I have been focusing on debt service ratio, NOI, Cap Rate and the like.

This is a fun game. 

@Edward B. I agree. It wouldn't absolve you of due diligence and actual evaluation of the property... But much like the 2% rule for monthly rent or 50% of gross income going to bills we have these things for quick evaluation.

 
It would just be interesting to see what debt load people justify for what level of monthly income. 

@Matt K. Clarification, 0 out of pocket. Locking equity from another asset as collateral. I didn't want to get into the weeds on the deal specifics. 

Homo economicus would say maximize utility on the loan side and profit on the income side. 

Easier question for everyone: Do you have an income amount for a given debt amount? 

@Niels Bjørn Toppenberg Thanks! I like where your head is at...

I'm just testing my desire for monthly cash flow vs general investment opportunity. I've only really looked at SFH and this jump to multi family gives me pause.

@Edward B. I agree and normally use CoC, ROI, and Cap Rate but here I was hoping to find a heuristic for borrowed capital utilization.
Almost a rule of thumb like the 1%/2% rule for monthly rent, or 50% for expense estimation. And my first pass at something would be like what I mentioned above: For every $50K in, you should see $100 monthly cash flow. I'm just not sure that is reasonable. 

No, bank financed. 

I have an opportunity to purchase 2 multi family apartment buildings. 

12 unit with 9% cap rate, $400K and ~$110 per door monthly cash

8 unit with 10% cap rate, $300K and ~$110 per door monthly cash

Seems to be after all cost a ~3% return on debt investment. (Without management fees it would look far better... but I’m out of state.)
Is there a rule of thumb I can trot out to evaluate investments on a debt to monthly cash flow ratio. Like for every $50k invested you should see $100 in monthly cash flow to be in the ballpark of good. Does something like that exist?