Trusting the BP Buy and Hold Rental Tool

[Ryan M.]

Hey All.

Ryan here from Boston.

I have a great realtor who is automatically sending me the MLS listings of my desired properties in the area I want and, to my surprise, I am seeing opportunities!

One thing I am worried about is this tool. I believe it works, but I don't trust my abilities or the numbers yet as I am nervous I am doing something wrong or somehow not considering something. I am getting COC's of 15-18% which is freaking me out a bit as I assume that is way too high, but at the same time, I am sitting here checking the numbers and trying to be conservative and still coming out with solid COC #'s.

I feel like it is my first time driving and I just don't trust my side mirrors and rear view mirror at all.  

[Jeff Petsche]

@Ryan M. based on my education and training when analyzing a deal I use the following for operating expenses:

Check with the local area you are buying by asking the local experts, but as someone who is a real estate Broker in CA, our average closing costs on the buy side for a buyer will run between 2%-3% of sales price (most of that comes from lender origination fees).

10% vacancy (most deals I see when being offered for sale are between 5%-8%, but if it pencils with 10% I know I'm probably covered on vacancy)

10% for property management (until I know exactly what the PM fee is then I would modify, but average is 8% to 10%)

5% for R&M

Actual Property Taxes

Insurance (Get quotes from 3 companies and take the average)

Landlord Utilities (12 month average. Get numbers from owner. If SFR property, tenant should be paying utilities)

CAPEX I've been told between $175 to $250 per door (monthly)

HOA Fees (if applicable. Actual Amount)

Lawn Care (None if tenant takes care of it, don't recommend. I get an average for the area and depending on the property)

I recommend you buy the book written by Brandon Turner here at BP. Book is called "The Book On Rental Property Investing. How to create wealth and passive income through smart buy & hold real estate investing"

It's a NO NONSENSE book that is direct and to the point about this business. I'm finishing my 1st read through now.