Using 50% rule on TK properties_barely cash flow

[Tim Greenfield]

I am a newbie but I have 1 rental property in Albuquerque which only breaks even. I currently live in Arizona and I travel a lot overseas for work so I am looking at TK providers. My primary residence is paid for in full. I just obtained a $92,000 HELOC on it and I have $60,000 cash to invest. I was going to use the HELOC initially to test the waters and keep the cash in reserves. I am still putting everything I save into my cash reserves to keep building it up. Due to my travel I was going to use a turnkey provider and I have been in contact with a few of them. Listening to podcasts I know that a quick rule of thumb to determine whether a deal is good or not is the 50% rule. But whenever a put the numbers that are provided by various TK providers, they never cash flow or are marginal? Further, the examples provided by the TK do provide for taxes but NOT insurance, vacancy, maintenance, PM fee.

Example- Memphis property in zip 38118 C or B neighborhood. 3/2- Complete rehab by a TK with a good reputation from what I understand. Price 87,000. Finance 69,600 finance, 910 rent and estimated 1321 a year taxes.

Monthly Rent: 910 so makes the 1% rule

-50% for expenses (taxes, insurance, vacancy, maintenance, PM fee)

_________________________

NOI: 455

Debt Service expense: 368.12 without taxes/insurance

Cash flow: 86.88

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Example 2 different TK provider- Texas Property A or B neighborhood property in zip 75063. 3/3

$154,100 Purchase price

$30,820 down

$123,280 finance

$1495 Rent so less than 1% but close

-50% expense(taxes, insurance, vacancy, maintenance, PM fee,HOA fee)

__________________

$747.50 NOI

$644.58 debt service without taxes/insurance

102.92 cash flow

This TK provider provided a little more information with exception of vacancy and maintenance. If I add in 10% for each I come up with even less cash flow of $33.58.

Am I figuring this correctly? My plan was to buy some properties that are strictly cash flow and the other with less cash flow but a better upside potential for appreciation. These two actually cash flow, some of the others that I looked at dont' even do that.

Any thoughts/advice would be appreciated

Thanks,

Tim