Running numbers on a potential rental property

[Caylon Coomes]

Hello BP!

This is my first post on here and I'm looking forward to hearing what knowledge is out there! My name is Caylon I'm a superintendent for a construction company in Bellingham, Wa. I used to run my own operation as a General Contractor doing remodels - residential and commercial, however now excited to become a real estate investor! By this point I've read quite a few books and after recently discovering Bigger Pockets, I've been pretty addicted to the podcast which has also been a huge wealth of information. 

So for some context onto type of property, and plan I have in place for my first deal; first is a 6 month goal to be debt free, and a 10 month goal to my first deal (which is when my current lease ends in July of 2019). I want to start actively searching for that property 3-4 months before my lease ends, and be passively looking, learning, and practicing for the whole 10 months (and hopefully well beyond!) I plan on getting into something to house hack; Preferably small multi-family but I wouldn't be opposed to a single family. And eventually will move out and keep it as a rental.  

Something I have been running into when I've been scanning for potential deals to run the numbers on, is how to run the numbers on it! I know there is so much that goes into it; and this is looking and a potential rental property so determining rent, mortgage, expenses, etc. It just always feels like I'm missing something, or knowing that there is something I don't know! So I would love some guidance and to hear how you other investors look at properties, generally run the numbers and determine if it will cashflow or if is a good potential worth further investigating. How both to quickly estimate while scrolling online and then what anyone does when they find one and want to look deeper into it. If anyone has tips, tricks, or any systems I would love to hear! 

Thank you for your time and looking forward to connecting with other investors out there. 

Caylon Coomes

[Andrew Leese]

Hi Clayton, 

There are a few rules of thumb you can use for quick evaluations like the 1% Rule and the 50% Rule. Both can be helpful but do not work for every single property. It's best to find out what your average expense-per-unit is in your market for the types of properties that you are looking at. This can be found by talking with property management companies and by doing your own research.

@Brandon Turner wrote a good article on estimating rental property expenses a while back: https://www.biggerpockets.com/renewsblog/2014/12/02/rental-property-expenses/

As Patrick says, Bellingham is an expensive market. There is a lot of money flowing up from Seattle and probably some flowing down from Canada as well. Asset prices in this class are quite inflated, IMO. If you want cash flow you are almost certainly going to have to source deals off-market.

Best of luck,

Andrew