All Forum Posts by: Steven E.

Your math might be fine with the expenses. But the problem is that you have no free cash flow. All lenders are going to require you to have a debt coverage ratio of 1.2 at least. You should be targeting at least $100 of free cash flow after expenses and debt service in order to meet the debt coverage ratio. Some lenders will require debt coverage of 1.25, and some will require 1.3. A 30 year loan might be more difficult to get. You should be able to do better than a 5% interest rate for a conventional loan. I'm thinking something in the range of 4.65% should be relatively easy to get assuming you have the financial strength to qualify for that interest rate. A 25 year loan at 4.65% would cost $423 per month instead of $402.

Agreed! I'm targeting $150 cash flow, not looking to buy this kind of deal. I was moreso looking to confirm if the estimated expenses looked fine since people oftentimes refer to the 1% rule. In this case it looks like 1.2% is a better goal.

0 Votes

Grand Rapids, Michigan

Hi all -- I'm trying to build out some kind of cash flow projection formula for analyzing properties. I'm looking in Grand Rapids/Holland/Muskegon/Kalamazoo MI.

For simplicity's sake, assume a $100K property renting for $1000/mo:

$400/mo for a 25% down, 30-year mortgage with 5% interest
$300/mo for PM/vacancy/repairs/CapEx (30%)
$250/mo for property tax
$50/mo for home insurance

Expenses = $1000/mo

My first thought was that property taxes looked pretty high. Non-homestead millage rates are around 50-55 in Grand Rapids, whereas in Kalamazoo/Holland/Muskegon they're around 60-66. With a tax assessment ratio of 50%, that puts property taxes between ((50000 * .05) / 12) and ((50000 * .066) / 12), or $208 and $275 respectively. Is my math off?

Cheers

0 Votes

Hi all -- I'm trying to build out some kind of cash flow projection formula for analyzing properties. I'm looking in Grand Rapids/Holland/Muskegon/Kalamazoo MI.

For simplicity's sake, assume a $100K property renting for $1000/mo:

$400/mo for a 25% down, 30-year mortgage with 5% interest
$300/mo for PM/vacancy/repairs/CapEx (30%)
$250/mo for property tax
$50/mo for home insurance

Expenses = $1000/mo

Cheers

1 Vote

Grand Rapids, Michigan

Will be at the next one!

0 Votes

All Forum Posts by: Steven E.

Steven E. has started 7 posts and replied 14 times.

Post: Is my cash flow projection way off?

Post: Is my cash flow projection way off?

Post: Is my cash flow projection way off?

Post: December Cupertino RE Meet Up