rental house expenses

[Nigel Ford]

   Ive noticed not surprisingly that when I lower the expenses evaluating a potential rental house, its much easier to find a good deal that cashflows. In John Shaubs book "building wealth one house at a time", When he evaluates a potential rental house he only puts tax, insurance, and repairs/maintenance as a 20% of rent expense. When I lower my standards to these expenses it seams a lot easier to make a deal, but at the same time i want to be safe. What do you guys think is that enough? 

Nigel

[Mike McCarthy]

@Nigel Ford as a quick calculation, 20% might be ok. But I always look up the taxes, base the insurance off another property (or give your local agent a call for a rough estimate). Those figures you should be able to get pretty exact.

Then repairs, capex, vacancies, I’d usually do 8-10% on each - BUT it depends on your property. If it’s a 2br place in a hot area, you might be able to assume 1/2 or 1 month vacancy. If it’s a large house with lots of land, it’ll probably be sitting a while between tenants. Same with repairs - new house with new kitchen, bath, etc... low repairs. Older house, you’re going to be fixing doors, plumbing, etc.

Long story short, the more realistic you can be with your estimates, the closer you’ll get to your real numbers once you start renting!