Need help with number crunching formula.

[Michael Randle]

Hello BP,

I need some help with numbers and my thought process. I have owned 2 investment properties, but those where kind of accidental and hobbies rather than a business. Something fun and interesting to make some side cash.

Now I am transitioning into a more serious approach and I am in the process of  crunching massive amounts of numbers and I  wanted to get input on my process and let some more eyes look over the numbers and see where my logic is breaking down.

I am using a formula of 20% down, 4.875% Interest 30 year fixed, 10% CapEx, Repairs, VacRate, PropMgT. All cash flow is diverted to a 6 month reserve at which time everything extra then comes to me as cash flow.

First, what is wrong with the above approach? I know I can adjust some of the CapEx, repairs or Vac rate up or down if needed, but 10% is generally a good rule of thumb for number crunching.

Second, do any other investors have a 6 month reserve fund that they stop funding or do you just constantly roll in your CapEx and Repairs accounts?

Third, and I suspect it is because of the MLS, why am I unable to find any sort of deal using the formula? It seems like off market deals are the only deals that will make sense to me.

Thanks!