Am I Too Conservative?

[Account Closed]

I've found that after I take into consideration my contingencies seemingly good deals on the surface don't look so attractive any more.  I wonder whether my assumptions/budget is too conservative.

I generally use the following assumptions:

[Based on a SFR: 1500 sq. ft./$850 Rent]

10% vacancy

$1000/yr Cap Ex Reserve

$100/mnth maintenance/landscaping/etc.

$1200 annual turnover cost (Breakdown: 1 turnover per year; Repairs: $100; Painting: $375 ($0.25/sq ft); Cleaning: $150; Management Fee: $850 (1 mth rent); Flooring: $375 ($0.25/sq ft); LESS Deposit: $850 (deposit) PLUS Evictions: $100/yr (using 10% eviction rate/$1000 eviction cost); Marketing: $100)

For example, for an Indianapolis - SFR (3bd/1bth; $65K purchase; $850 rent; $600 Insurance; $0 Utilities Paid by Owner; Tax: $1900) the Cash On Cash is about 4% / $240/mth.

Using the 50% rule, $425 would be leftover per month. With my numbers, I'm calculating 72% Expenses & 28% NOI.

I'm eager to get my first property but don't want to be blind-sided by foreseeable expenses; however, if I play it too safe then I'll never get in the game.  Are my numbers off?

[Arlan Potter]

Way too conservative.  I own close to 60 units. Over the last 11 years I have evicted exactly 4 tenants. Most tennants(good ones) dont leave. We also have very little maintenance. Even with older houses, the majority have zero maintenance for most years.

Plus, if you borrow against the property. your return on cash is huge. And the renters pay the loan off.