All Forum Posts by: Nathan Hui

Have the locks been changed? I’m curious to know the outcome..

@Nathan Hall The Kwick set locks don’t solve this issue. If anything a tenant could easily buy that little tool and change the locks with less effort and money...

@Bryan Devitt That is hilarious

Bigger Pockets,

I think it is time for a new acronym...

After spending time on the forums I have realized that there are large gaps in communication when it comes to calculations for cash flow or net income on buy and hold investments. From my perspective the issue is because they're large variances on how people calculate cash flow and subsequently, how we talk about cash flow. We have come to know PITI. (If you hover over that acronym you can find out what that means) People sometimes take their gross rental income and subtract PITI in order to get their cash flow. Many others include more expenses...

How about VMCP? (Vacancy, Maintenance, Capital Expenditures, and Property Management) With this new acronym we could quickly clarify cash flow discussions. For example: "Did you include VMCP?" or "I noticed your VMCP is $600/mo, do you think that will be adequate for that 24 unit?" 

What do you think? Do we have space for another acronym? Can we get consensus and throw an underline under VMCP?  

Disclaimer: I am a newbie, I don't even have an investment property yet. (Feel free to blast me) 

I would throw that money you have saved up for (Vacancy, Maintenance, Cap Ex, and Property Mgmt) into your "Est. Total Cash Down". That money will be tied up in the investment and should be included in your calculations for a realistic COCROI. Excluding that money will either inflate your ROI, CF, or both.

Also, I personally think the 50% rule is a really conservative estimation for cash flow so it may not represent realistic expectations for cash flow but here are your numbers...

Your rental income projection is $995, PITI is $484.16

50% Rule (Cash flow) = (Rental Income x 0.5) - PITI

50% CF = $13.34/mo 

*If you do you own maintenance, PM, your property is totally updated, it is tenant proofed, awesome tenants, etc... then 50% Expenses on top of PITI is probably a gross overestimation.

Ryan what did you end up doing? 

I am now asking myself what should I do with the quad I am under contract for. The entire market I am in does not include w/d. However, the apartment complexes that include w/d have a serious competitive edge. Asking $100 - $150 more per month with similar sq. ft, finishes, etc. I view w/d as a relatively small expense because it would add rental income and decrease vacancy. But I am new to REI and I am probably underestimating how destructive tenants can be. Maybe individuals who bring their own units are likely to stay longer....

@David Nacco Thanks for the input! The numbers I have been running are way higher! I had 8% for vacancy, 10% for maintenance, and 5% for cap ex. But this quad needs work, some deferred maintenance here and there and it was built in 1979 so I am anticipating more issue m than normal. Do you still think my numbers are way too conservative?

Hey William, 

Congratulations on your first purchase! I am working on buying my first quad to house hack. I am very interested in the details on your purchase. 

I have tons of questions for you...

1. How did you calculate $440/mo? (Rental income - PITI)?

2. When you purchased, what was the gross rental income? 

3.  I have the same plan. Renovate systematical after each pre-existing tenant leaves and raise rents. What are your estimations on overall gross rental income after you leave the quad?

4. Did you get estimates for renovations with a contractor? What do you think the price tag will be for the whole quad once you are done? 

5. Are you planning to use property management or will you do it? (I am concerned about this dynamic) 

6. When you say "talk to the current tenants" what do you mean by that? I am due diligence now, would love some pointers on tenant investigation. 

7. What is a 97 conventional? Is that 3% down, does that even exist? I am assuming you have PMI, right?

8. How long are you planning on staying in the home? What is your next move? More house hacking, single family, quit buy and hold? 

9. How did you structure your expenses in terms of vacancy, maintenance, cap ex, utilities, and property management while doing your deal analysis? 

@Jasmine Feeney I see, that’s great, way different than 340k!

BP People, 

I am under contract for a quad! It will be my first potential deal. Planning to house hack with FHA, very cliche.

When you calculate expenses for a quad do you set aside higher percentages of rental income for vacancy, maintenance, and cap ex? I am trying to determine realistic numbers. I do realize vacancy is relative to the market and rent rates. Also, maintenance and cap ex is highly variable. BUT in general what do you all do to accurately predict these numbers when doing analysis? OR, even better, what is your method for getting solid numbers if you don't have rules of thumb for this kind of thing?