Investment Property in Georgia | Need advice/guidance

[Akshay Bhaskaran]

Hello Investors,

I'm planning to buy my first investment property in Georgia (probably a SFH or Condo or TownHome). While I'm trying to crunch the numbers for my analysis, I'd like to hear from the experts here to see if my calculations are right:

(Context: I'd be taking a HE loan against my primary house to cover the down payment for this investment property)

1. Gross Rental Income = Rental Income/month * 12

2. Gross operating expense = Vacancy charges for 3 months (3 * P + I for mortgage and HE loan) +

                                                      Property management fees (12 months) +

                                                      Property tax (12 months) + 

                                                      Insurance  (12 months) + 

HOA (12 months) +

                                                       Maintenance/repairs 

3. Net Operating Income (NOI) = (1) Gross Rental Income - (2) Gross Operating Expense

4. Gross Financing Cost = 12 * P + I for mortgage and HE loan

5. NIAF (Net Income After Financing) = (3) Net Operating Income - (4) Gross Financing Cost

6. Cash-on-cash return = (5) Net Income After Financing / (Down payment + closing costs)

Now my question is this:

- I am already tallying 3 months of vacancy charges (no rent) as part of gross operating expense (2)

- So, in my gross financing cost (4) - should I put it as 9 * P + I for my loans (coz 3 months vacancy is already tallied in gross operating expense [OR] it should be 12 * P + I for one complete year)