How to Calculate if Duplex or SFH Has Positive Cash Flow?

Question

Any calculator or rental calculations that you recommend for Duplex or SFH to analyze if they're worthy of buying for positive cash flow?

For example, there's a 1950 duplex for sale (West Palm Beach, FL) for $500k with each tenant (MoM) paying $1,500 = $3k/mo

The mortgage is $2.8k/mo

Would this be a bad investment because you would have to factor improvements and possible vacancy?

If so, what would you recommend would have made this deal better as an investment?

George Craciun · Answer

Like Matthew said, you need to have specific goals.

Where did you get the mortgage at $2800?

At 8% interest rate with 20% down payment only the PI would be around $2900.

I noticed that many investors that don't know the South Florida market ran their numbers based on the current property taxes and insurance.

The property taxes are being reassessed yearly and probably you will only get the new taxable value 12 to 18 months after the purchase.

For instance a property that I purchased in May 2023, was homestead and the property taxes were around $3500. Next year, I expect the the tax bill to be around $15000 as it is an investment property.

I didn't see too many people talking about this topic in Florida.

Mike Curadossi · Answer

@Bob Asad What values were the properties you bought?  I am sure maybe they only went up a little bit prior to the crazy price increases.  Values have at least doubled since covid which means if you buy a new property it gets assessed at the new value.  If there is no way to get that kind of cash flow then buying the property doesn't make sense.

I have a real estate meetup in Jupiter at the locomotive coffee the second Tuesday of each month from 8:30-10am.  Happy to talk more if you want to attend please shoot me your email and I can add you to our email list.

Alecia Loveless · Answer

@Bob Asad Not sure anyone answered your question about the calculator.

I use the BiggerPockets Calculators that you find under the Tools drop down for all my calculations.

It is comprehensive and has not let me down in analyzing dozens of potential deals. It saves your previous calculations and I update mine as things change and I want to re-analyze a property.

The first 5 uses are free and then after that with a Pro Membership you get unlimited usage.

Education expenses can be considered a write-off so potentially (ask your accountant) the Pro Membership cost could be considered a write-off.

This is not advice. I am not an accountant.

Bob Asad · Answer

Not sure what type of properties you've bought that have gone up that much in taxes. I've bought a few SFH and in Florida and they only up several hundred (a thousand max) in a year.

Also, I don't think there's any way for a SFH or Duplex to make $5k per month cash flow, so are you referring to 8+ unit apartments?

Mike Curadossi · Answer

Your taxes will 100% shoot up. Mine went from $11k to $22k in one year after I bought a property.  Also make sure you have a great property insurance company to give you quotes. Insurance has doubled, mine included. If your buying a building that’s $500k, you need to be getting at least $5k a month if not more or it’s not worth looking at in my opinion unless there is some other revenue source (ability to add bedrooms or units, air bnb) or you can increase rents substantially. BP has calculators you can run numbers with.

George Craciun · Answer

The property taxes in Palm Beach County are on average 2% of the assessed value of the property. Those are being reassessed every year by the county. If next year,  the county says that property value is $600k, your property taxes for the following year will 2% of the new value. If the property is homesteaded, you are grandfathered only at max 3%.

You can see bellow an example as the taxes increased after the change om ownership.

the big difference is due to fact the area appreciated 1000% since the 90s when the house was initially purchased as a homestead.

Bob Asad · Answer

I don't think the property taxes would jump that high in one year because it's an investment. Aren't the taxes for investments treated similarly as primary? (Even with homestead) You can also write off the depreciation for the investment.

How to Calculate if Duplex or SFH Has Positive Cash Flow?

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