% of rent understandings

[William Huston]

I was curious if someone could give me a little input on this so i could better understand it. I recently posted a list of numbers i ran on some properties local to me after writing some code on Podio to make it quicker and easier to do the calculations. When i published it someone mentioned to me i need to use the % method to quickly analyze a deal, that i am wasting my time imputing all the details in my fancy software....

So i am a little lost on what and how this works if someone could explain it to me. 

Just to throw out a property for example:

100k Purchase price

10k in repairs

130k ARV

1300/month rent

1313/yr taxes

550/yr flood insurance est

800/yr insurance est

10% management fee...

[Peter M.]

What exactly is your question? Rules of thumb like the 1% and 2% rule can be used for quick analysis but they are hardly ever accurate to actual numbers. It is best to run your numbers all the way out each time for the best picture. Is this a long term rental or a flip?

As far as this info goes you are missing monthly expenses, cap ex, vacancy, and utilities. 

I plugged it into my calculator and if this is a conventional loan, 20% down, 30 year with 5% vacancy, 5% cap ex, $1000 in maintenance for the year and 0 utilities it gives you monthly cash flow of $212, CoC of 6.41 and DSCR of 1.4. Seems like a pretty decent deal.

If its a 4 month flip and you had cash for it, with only 10k in repairs you would stand to make about 7k. 

Hope that helps