Please help me understand Variables in Rental Property Calc's

[Sean C.]

I've started to try and analyze properties, to get into the practice, however there are several variables that I do not know when it comes to estimating.  I'm aware these are very beginner questions, and appreciate any help you can offer

1. When you figure out the Interest Rate, how do you determine what number to use?  Do you have to go figure out what banks would charge *you*, as in go get preapproved/prequalified before this is analyzed?   If not, where do you recommend I find the Interest Rate information, so that I can have a carefuly considered analysis?

2. In Insurance, how do you come up with your numbers?  Do I have to call an Insurance company with the property address for every individual property every time, to get that estimate?  Or is there a way to figure out a comfortable guess.

3. Is there a way to figure out if I pay the utilities, or the tenant does?

4.  I have heard of Property Management fees, ranging from 6-8% in Podcasts.  How do you find the most accurate figure for your Property Management Fees?   Do you have to call several agencies in your area, and then average them to find out what they are? 

Thank you in advance.  I'd love to learn how you guys dig up certain details.  I feel like the better you understand the numbers, the better you can analyze these.

Best,
SC

[Brenden Mitchum]

Hey @Sean C.

First, have you watched the webinars here on BP that explain the process? If not, start there. After that, take the time to watch @Mitch Messer's deal analysis series he put together. Each episode an investor goes through their deal analysis with the help of Mitch and other attendees. Fantastic content for anyone starting out in REI.

Still happy to answer your questions but I'd recommend watching the above videos first to see if you can answer them yourself after!

1. Best way is absolutely to get pre-approved or speak with a lender about current market rates for your asset class. However, I'm sure you can also find this information online. Right now owner-occupied residential you'll be around 3%. Residential investment is around 4%. Again, if you want more accurate numbers, speak with a lender. Or, speak with a lender anyways since this is the perfect opportunity to start looking for that team member.

2.  Same as the above but instead you need to speak with an insurance agent. Remember, if you're serious about investing in real estate you're going to want one on your team so why not start reaching out to some now. Give them the address of the subject property and compare their rates and what is covered. Now, you'll have a decent idea of what insurance will be for that type of property in that area and you may even have a new member of your team. I do not have an estimate on this one for you since it really depends on the area and property.

3. That one is entirely up to you. In some markets it's standard one way or the other but it's still up to you. Just make sure you adjust rent accordingly to keep with the market.

4. Same answer as 1&2, but most folks use 10% as their estimate until they've built a relationship with a PM and know the exact figure. 

It's really all about your team and constantly improving your assumptions. Each bit of new information you find on a property changes the underwriting a bit. 

Hope this helps and please, feel free to reach out to me anytime if you have other questions or just want to chat!