‘analysis’ or ‘paralysis’?

[V G.]

H everyone,

I am a SF Bay Area resident who is looking for alternative investment vehicles for long term-hold. I have been lurking on BiggerPockets forums for months now and thought it is time to come out of shadows.I have listened a number of podcasts and read hundred of posts.

I am looking at turnkey out-of-state or using property manager in areas with 2 hours drive. Based on this, I did some research, reached out to a couple of turnkey companies out of state and talked to REI group. I took their numbers and did my analysis. Not one cash-flows. So, I am thinking ‘analysis' or ‘paralysis'? Please help me validate the numbers and assumptions I am making:

1. Property Management: 10%
2. Maintenance: 5%
3. Vacancy: 5%
4. Move-out: 500 per year a tenant stays
5. Cap-ex: $250 per month
6. HoA, PITI: actuals (provided by company)

Now, if I buy in regular turnkey towns where rent is ~$1K, then first 1-3 and 5 is 45% of rent. 1-4 are coming from the turnkey provider, I have seen higher number recommended for Maintenance and Vacancy on BP. Cap-ex is a number I picked on a couple of forum threads. PITI are actuals and most cases assume 20% down. A couple of examples which I use for reference.

1. Memphis (Turnkey)
   1. Rent: $1100
   2. PITI: $761 (~70%)
   3. PM, Vac, Maintenance: 20%
   4. Move-out, Cap-ex: ~25%
2. Sacramento:
   1. Rent: $2400
   2. PITI: $2350 (~95%)
   3. PM, Vac, Maintenance: 20%
   4. Move-out, Cap-ex: ~10%

Are my cost estimates too high? Or has the market does not make sense anymore?

I am doing my analysis right? Any examples that you can share based on your experience? Am I missing anything on the positive side? I don’t qualify for taking rental losses as deduction. Also, it would make sense to take loss only when you are in hyper-growth market and looking for price increase and not cash-flow.

My goal is to generate $2K cash-flow per month at end of 5 years. My Market & Property selection criteria are:

• City should exhibit both economic & population growth
• B or higher grade neighborhood
• Mix of rental & owner occupied homes in the neighborhood
• Review crime-rates
• Avoid cities with harsh winters (issues with pipes, liability, salt, etc)
• Price range of 75-125K

Thanks all in advance!

Vidur