All Forum Posts by: Pam Coleman

The basement is concrete and very old. I believe the water issue is coming from a leaking hot water tank and moisture from a leaking sink that was never fixed. There is no drywall down there. No black mold present. I believe this can be taken care of with bleach and a power washer.

1 Vote

Cleveland, Ohio

Quote from @Mitch Messer:

Hey @Pam Coleman, congratulations on taking a swing at your first deal!

OK, so it's Saturday night and I'm ready to party... (And by "party," I mean "run some rental analysis calculations!" Yep, I'm a nerd... 😂)

For starters, you'll at least want to calculate Cash Flow and Cash-on-Cash Return on Investment.

To do this, you'll need to know a few more things:

* Renovation Cost needed to make the property rent-ready and Section-8-compliant

* Closing Costs to finalize the purchase

If your rent figure is accurate, you've got $18,264 in Gross Annual Income (GAI). We need Net Operating Income, which is GAI minus Operating Expenses.

Operating Expenses include, at very least, insurance, property taxes, management, maintenance, and vacancy.

You've already got insurance at $1380/yr and property taxes at $1524/yr. (Be sure those taxes don't include a homeowner's exemption, which you won't qualify for after you buy!)

Let's assume management expense of 10% of GAI, or $1826/yr. Let's put maintenance at 5% of GAI, or $913/yr. Lastly, let's be conservative and assume one month of vacancy every year, or $1522.

Add 'em up and you get Operating Expenses of $7,165 (1380 + 1524 + 1826 + 913 + 1522)

So, NOI = $11,099 (18264 - 7165)

Your Cash Flow = NOI - Capital_Expenditures - Debt_Service

You're buying cash, so no debt service. Also, you're going to renovate everything that needs it (right?), so for now let's set CapEx at zero as well.

So Cash Flow = $11,900 (11900 - 0 - 0) or just under $1000/mo!

Not bad, you say?

Well, not so fast...

We really need to know how hard our investment dollars will be working for us in Year One.

That's where Cash-on-Cash Return (CoCR) comes in: The higher the return, the harder our cash is working. Anything over 10% is generally pretty good!

The formula is CoCR = Cash_Flow / Total_Cash_Invested

where Total_Cash_Invested = Purchase_Price + Renovation_Cost + Closing_Costs

Since we're missing some info, let's guestimate, for completeness.

Let's assume Renovation Cost of $20,000 and Closing Costs of $5,000.

So, CoCR = 11.4% (11900 / (79275 + 20000 + 5000))

That's not a bad return! Assuming the numbers are valid, I'd say this was a deal worth doing!

Given all this, could you now calculate the Cash_Flow and CoCR with the actual numbers and post it below?

How was I calculate Capital Expenditures? And my Debt Service is just PITIA correct?

0 Votes

Cleveland, Ohio

Thank you Mitch, this was very helpful and I will def refer back to this post when doing my calculation. I often forget the formulas.

In this case the CoCR will be even better. There are no repairs needed. This is a Turnkey Tenant-Occupied Property already.

CoCR= 14.1% (11,900/ (79,275+ 5,000)

0 Votes

Cleveland, Ohio

Good afternoon BP Community. I am looking to buy my first property. I was presented a deal that I would like to purchase (Section 8 SFH), but I wanted to make sure it was a good deal before I pulled the trigger. What are some of the metrics investors use to calculate if it is a good deal or not?

Here are the numbers

$79,275 is the purchase price . Insurance would be around $115/month and taxes $127/month. I want to own this free and clear so no mortgage. Are they any additional expenses I need to account for?

Rent is $1,522

How would I calculate ROI and Cash on Cash Return

3 Votes

Cleveland, Ohio

The inside of the house is fabulous. I would possibly change the paint color and maybe paint the garage door and front door a contracting color to make it eye catching. I see the house a celery green and the doors a darker green. Or maybe shades of blue. Otherwise, the house is lovely.

0 Votes

Cleveland, Ohio

All Forum Posts by: Pam Coleman

Pam Coleman has started 1 posts and replied 5 times.

Post: Mold Remediation? Anyone have to deal with this !!?

Post: How to Calculate the numbers?

Post: How to Calculate the numbers?

Post: How to Calculate the numbers?

Post: What should I change on the outside?