All Forum Posts by: Tess Robinson

Agreed, @Scott S... I added the sewer/trash/water because I would prefer to pay my own to avoid lien situations w/TPU. But, @Mike Bales, there's no reason you can't pass those costs along to your tenant, and pay the actual bill yourself. 

You know your house, @Mike Bales. You need to take into account any future capital expenditures (capex) that it will need (roof/water heater/furnace).  What types of routine or emergency maintenance will it need (water leaks / exterminator / smoke & CO2 detector maintenance / air filters / gutters / outside maintenance / paint / flooring / refresh between tenants, etc.). Will you mow the lawn yourself, or hire it out? Will you manage the property yourself (and take calls at 3am) or hire it out? You should set aside some money every month (from the rental income) to account for these items. These are called variable expenses, and as the name suggests, the cost will vary. Wildly, sometimes! Some investors use a percentage of the rent (10% for capex / 10% for Property Management / 5% each for maintenance & vacancy). You may use different numbers -for example- if you just replaced your roof.

You've already accounted for your mortgage payment. If that payment doesn't include taxes and insurance, you need to add that into your monthly expenses, as well. You'll want to pay your water/sewer/trash (don't leave that to the tenant), so count that as an expense as well. These are fixed expenses.

Then take your total income less your fixed & variable expenses:

$2200 - Monthly Rent
(220) - Capital Expense (roof, etc.)
(220) - Property Management Fee (you could do it yourself)
(110) - 5% Vacancy (money set aside each month to cover future vacancy)
(110) - 5% routine/emergency maintenance
(150) - Water/Sewer/Trash (I pay ~300 every other month in Tacoma)
(1600) - Mortgage (hopefully includes PITI)
(210) - Negative Cash Flow/month.... 

There are great calculators on here... and I'm literally GUESSING at your numbers, but this is what you need to be analyzing. There are tons of variables involved, so use your best judgement. Look over the calculators on BP, and find some like-minded people at Meetups, etc.

Good Luck!

That should work! That's always our sticking point... where to live. And timing... as you said, it can take some time to find the right deal. Especially around here! And you don't want to have to make a contingent offer, that's for sure! Not w/all these cash buyers in our neck of the woods!

Hey @Mike Bales ... My husband and I have kicked that question around for some time now. We also live in Tacoma and have a fair amount of equity in our primary residence. The one question that we keep coming back to is, "where will we live if we sell/rent our house"? And the answer always seem to involve increasing our monthly expenses, or decrease our amenities....  

The one thing we sorta-semi-partially agreed on was that a house-hack might work... at least then if you're losing a bedroom or some square footage, at least you're building your empire at the same time!

I agree w/@Jameson Sullivan if you want to have some ready cash....a refi or HELOC may be the answer for you.

Good luck! 

@Jay Hinrichs... what is your 503C doing? We're just starting in the business, and I want to be able to give back, too. I'm interested in what/how to do it.

@Emiel Barbosa... We're in the same boat as you, only in the Pacific NW.... Seattle prices are sky high, and our own backyard is not an option for newbs (unless you already have a few hundred thousand in the bank).... We simply can't compete with the cash buyers here right now.

We're looking towards Cleveland as well, and hear mixed reviews (as above). Research is key. Good luck!!

Thanks @James Wise! Appreciate the info.

That was helpful, @Rob Gillespie. 

@James Wise @Rob Gillespie Can you explain POS - what it is and how to avoid it?