Investment Margin

[Robert P.]

I'm looking at a place that will bring in ~950/month after mortgage, taxes, PMI, home insurance and water/sewage.

Fully occupied with long term tenants, and no major outstanding maintenance that needs to be done. 

Would you say this is a good margin on a property? What other fees (if any) am I missing?

First time investor looking for some information!

Thanks!

[Alexander Felice]

what @Jon Holdman is referring to is monthly expenses that you have not listed. These numbers are missed by new investors and it's crucial you factor them in.

vacancy = 8-10%

Maintenance= 5-10%

Management (must be accounted for even if you self manage) = 8-12%

CapEx = 8-10%

A simpler way to do this is the "50% rule" which shouldn't be used in place of calculating actual expenses but to quickly see if a deal is worth your advanced attention. 

The 50% rule says that 1/2 of your revenue will go towards expenses before debt service. Based on your numbers it would look as such:

2300 rent

-1150 expenses

-mortgage PI ONLY (guessing ~650 based on what you provided)

= 500 net 

This still looks really good. I would take your time and go through all the calculations a few times to be thorough. BP has a calculator you can use for free a few times without upgrading your account as well.