All Forum Posts by: Ken Ly

I'll disagree and say the first one is an acceptable deal. The 2% rule only works for rents around $500/month. Yours are much higher. Your NOI estimates are much higher than reality, though.

First deal:
$200,000
Down: $50,000 (25%)
Loan: $150,000
Payment: $899.33 ($150K, 6%, 30 years)
Rents: $3075
Expenses, capital, vacancy: $1537.50 (50% rule)
NOI: $1537.50/month, $18,450/year
Cash flow: $638/month, $7658/year
Cash on cash return: 15%

That looks reasonable.

The second deal is terrible, assuming its a regular SFR rental. If this is a triple net lease, it might be an OK deal.

Okay I can't help but try this...here is my formula but I tweaked the expenses because although it is not a triple net lease, my only responsibility would be taxes and insurance.

2nd deal:
$235,000
Down: $58,750 (25%)
Loan: $176,250
Payment $1056.71 ($176,250, 6%, 30 years)
Rents: $2400
Expenses (only property tax and insurance) $450
NOI: $1950/month, $23,400/year
Cash flow: $893.29/month, $10,719.48/year
Cash on cash return: 18%

Did I do this right...I know my expenses may be wack but property owner is on a lease and has been in business for 20 years (runs a business out of the home) so I don't assume vacancy for any period.

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Wow thanks for the replies guys I must have a lot to learn..

I thought the 2nd deal was favorable because the only expenses I would have is insurance and property tax...

plus the renter has a lease until 2014 and is willing to sign a long term lease upon change of ownership..

there so many formulas i feel like i'm in math class...i guess i have a lot more to learn..

can someone point out why prop 2 is bad? please excuse my ignorance!

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Hey guys,

Stumbled upon here by accident and really love this site...coincidently was faced with a decison on a couple of properties..I'm just starting out so please be kind..wanted to get an idea of what would be a better investment...I have 2 rental properties to choose from...keep in mind I will be financing with the traditional 20% down conventional loan:

Prop 1: $200K...2 units...total rent $3,075/mo...$24,497 net operating income...section 8 tenants..property needs tlc

Prop 2: $235K...sfr but renter is using it for his business...20 years he been there and has a lease until 2014...$2,400/mo...$25,110 net operating income...renter pays for all repairs and maintenance

It may seem like a no brainer but I'm stuck...any thoughts or opinions? I plan to hold on to the property for a while but want the flexibility to sell if I decide to move onto something bigger...

Thanks everybody in advance!

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All Forum Posts by: Ken Ly

Ken Ly has started 1 posts and replied 3 times.

Post: Which is the better deal?

Post: Which is the better deal?

Post: Which is the better deal?