Evaluating Properties (First Potential Purchase)

[Diego Furlan]

Hi, everyone!

I wanted to ask for your feedback on how I am currently evaluating properties. I am new to investing but eager to learn! I've read a few books, attended webinars, networked, etc, and I plan to keep doing so. BUT I also want to make sure I'm applying the knowledge correctly by hearing it from the pros!

Currently, I am looking for a property below $250k and here are the metrics I am using to evaluate if the property will give me cash returns:

IDEAL HOME (I believe these are the ideal metrics, please correct me if I should adjust my filters): 

• Listing Price: ≤ $250K 
• Property Market Value: ≤ 80%
• Property's Price Value Appreciation Rate: ≥ 3% (I read articles and gathered other data to find trending markets. After doing so, I looked around in Realtor.com while also checking with local real estate agents within the vicinity of the supposed trending markets to confirm the validity of my resources' claims. Should they be accurate, I believe that anything above 3% is a good deal)
• Property's Rent Value Appreciation Rate: ≥ 1.5% (I used the same method as above but more rent-oriented)
• CoCROI: ≥ 7%

INCOME:

• Monthly Rent - I look into what the median rent price is within a 1-mile radius using a few resources like Zillow.com, Rentometer, Craigslist, etc. (Applying the house's specifications).

EXPENSES:

• Mortgage
• Tax
  
• Insurance
• Utilities
• Vacancy: (I was thinking of saving up 3 months worth of rent? Or charging a monthly fee?)
• CapEx
• Repairs
• Management Fee

CASH FLOW:

To find my rental income, as I previously mentioned, I am using a median amount (contingent upon my total cash return) by searching for a 1-mile radius using resources like rentometer.com. I believe having a cash flow of at least $100 should be enough but that would also be tied into the amount of cash invested, but please, correct me if I'm wrong!

CoCROI:

Annual cash flow divided by my total cash investment.

Say I invested $20K and my total annual cash flow was $2K. My CoCROI would then be 10% 

CONCLUSION:

I would consider this a solid deal. 

Any thoughts, suggestions, and comments are highly encouraged and appreciated! 

(And on a side note, do you have any preference on the methods you use to skim through listings? (Like the 50% Rule, 2% Rule, or maybe one custom rule that you recommend?) Or do you recommend doing extensive research for each property? 

Thank you!

Diego Furlan