Analyzing Condo Rentals

[Rachel N.]

I've been trying to analyze condos as rental properties, and I'd love to get some feedback on this hypothetical purchase to see if I'm running these numbers correctly. I want to be sure I'm counting on all possible expenses and didn't know what the differences would be versus a SFR. Assume an HOA that is running smoothly and with sufficient reserves, with no forthcoming big assessments. (I know, the pitfalls of condo ownership). Also assume everything looks pretty good with current appliances/water heater/ a/c etc.

Purchase price: $65,000

Down payment: $13,000

Monthly rent: $950  = $11,400 yearly income

$500 tax

$350 insurance

$2640 HOA ($220 per month)

$95 vacancy (10%)

$2400 CapEx

$900 prop manager ($75 per month)

$3240 mortgage ($270 per month)

= $10,125 expenses

11,400 – 10,125 =

+$1,275 per year, $106.25 per month

Does this look like I'm missing anything? Would it be a good deal for cash flow in an appreciating area? I am lumping CapEx and repairs together at $200 per month.

[Paul G.]

That looks about right for everything that could come up, but I think you missed a number somewhere in your calculations. With your numbers from above, I've calculated $11170 in expenses (Tax+Ins+Vac*12+CapEx+PM+Mtge). This gives you $19 a month in Cash Flow.

I personally think you're putting aside too much for CapEx and Maintenance, but that is just me. My goal is once I get to 8K I stop putting money aside. 8K is enough to cover if my AC/HVAC/Flooring/Appliances needs to be replaced all at the same time. Those are (probably) the worst things that can happen to a condo at any given time and that would be the perfect storm of holy crap.