DFW Analytics Model - Revenue / Expense Assumptions

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DFW Analytics Model - Revenue / Expense Assumptions

Jacob D.
Hurst, TX · Member since 2014 · 10 posts · 5 votes

Hi All - I am a newbie in the learning / education accumulation phase. My strategy is likely going to be buy and hold single family homes in FW area to rent out. I am looking at homes online on a daily basis, but right now I have zero'd in on a few zip codes that I believe that 1% of rent to purchase price is pretty attainable (but I'd like to approach 1.1% or more if possible). Obviously the higher the better and it all depends on the specific deal. I'd also like to catch the market in the fall/winter as it seems like sometimes the market isn't quite as hot and it might be easier to grab deals then -not sure if this is a correct assumption?

As a part of my preparation for the purchase of my first investment property (shooting for next 9-18 months) I still have a lot of work left to do as far as research on the legal side of things, landlord/tenant contracts, owner financing options, etc. etc. 

But I am also working to tweak my Excel model so that I can plug in numbers and be ready to go QUICKLY - once I find deals that may work for me. I am hoping to get some guidance on my current revenue/expense assumptions:

Rent / Purchase Price -> 1.0% to 1.1% (model set-up for varying ranges)

Vacancy Rate -> 0 to 10% (model set-up for varying ranges)

 Property Tax -> ~2.5% (looking at Tarrant County property site for reference)

Insurance -> ~0.9% (based on my personal residence)

Property Mgmt. -> 0 to 10% (model set-up for varying ranges; I can minimize my managing myself, but cost is still my time)

Maintenance & Repairs -> ~10% (rough guess - 5% for maintenance and 5% for cap-ex improvements)

$500 for other misc per year

Am I missing anything? Any other suggestions are welcome and greatly appreciated. From my research, it seems like it's probably pretty common in DFW area to have tenants do lawn-care, but I'd probably need to cover items like pest control, HVAC check-ups etc.

Also I am seeing mortgage rates for investment properties ~ 5.75% to 6%. Any other ideas on minimizing the interest rate? And what's the going rate for private money if I decide to go down that route and try to engage other investors.

Learning every day and I LOVE IT!

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Ryan BlakePro Member
Lender · TX · Member since 2018 · 936 posts · 713 votes
8y

@Jacob D. Your numbers seem to be in-line with where they need to be. I would suggest going closer to 1.25% or more on your rent to purchase ratio. The reason being is we have much higher property tax than the rest of the nation to make up for the lack of state income tax. I think assuming 2.5% should be a good estimate. Good news is that it will be based on assessed value and not on what you purchase it for. You can find out the assessed value on TCAD.

I am an excel nerd and love creating spreadsheets for everything. Happy to hear that you do the same. I think it is the best way to get a quick clear picture. My one sheet tells me what the numbers would be on renting, flipping, owner financing after a flip or owner financing on an as-is home.

[email protected]214-420-7324
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  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    8y

    You sound more prepared than 99% of other investors. Just be sure you have an appropriate term of investment. If you're investing for 4-5 years, it helps weather any annual dips or big expenses. Remember, your maintenance can happen all at once and in the beginning of ownership--don't rely on rental income to cover it.

    1Reply
  • Ryan BlakePro Member
    Lender · TX · Member since 2018 · 936 posts · 713 votes
    8y

    @Jacob D. Your numbers seem to be in-line with where they need to be. I would suggest going closer to 1.25% or more on your rent to purchase ratio. The reason being is we have much higher property tax than the rest of the nation to make up for the lack of state income tax. I think assuming 2.5% should be a good estimate. Good news is that it will be based on assessed value and not on what you purchase it for. You can find out the assessed value on TCAD.

    I am an excel nerd and love creating spreadsheets for everything. Happy to hear that you do the same. I think it is the best way to get a quick clear picture. My one sheet tells me what the numbers would be on renting, flipping, owner financing after a flip or owner financing on an as-is home.

    [email protected]214-420-7324
    2Reply
  • Andrew Herrig
    Rental Property Investor · Dallas, TX · Member since 2012 · 502 posts · 263 votes
    8y

    @Jacob D. I think you are pretty on target. I generally budget around 15% for repairs/capex. Some of these numbers depend on what your rent is...capex on a house that rents for $1000 are generally going to be pretty similar to a house that rents for $2000, but if it's 10% of the rent at $2000, it's 20% at $1000. With your rent/purchase ratio target I assume you are looking in the $100-150k price range?

    0Reply
  • Jacob D.
    OP
    Hurst, TX · Member since 2014 · 10 posts · 5 votes
    8y

    @Ronald Rohde thanks for the tip! I'll definitely make sure I have easy access to cash in the event I have a big outflow. With my luck, I'll have an A/C go out in the first year - but guess that means I just won't have to replace HVAC for 12-15 years after that. Ha!

    @Ryan Blake I would love > 1.25% and think coverage like that is attainable, especially if I become a cash buyer with private money and I am patient enough. Love the idea on the multiple scenarios. Need to get smarter on the owner financing piece so I can incorporate into my model. More scenarios = more flexibility and more possibilities for deals instead of a yes/no.

    @Andrew Herrig Yes - I am looking in that range, preferably on the lower end. I think the $1100 - $1400 rent sphere seems to be a really nice sweet spot for family centric neighborhoods where I am looking right now.

    0Reply
  • Giovanni Silvano Salvatici
    Member since 2018 · 2 posts · 0 votes
    8y

    In the same area looking to do virtually the same exact thing. Still learning and working out a way to attain financing since my employment situation is a little out of the ordinary, but otherwise have a bit of cash to put into a few investments.

    I've also been working on a spreadsheet the past few months, though I'm always tweaking it. Might be interesting to share files if you'd like.

    0Reply
  • Trevor Diffley
    Member since 2018 · 3 posts · 1 vote
    8y

    @Jacob D. unqualified perspective, but those benchmarks look good (I will be adjusting them for the ATL market and borrowing them). I hate doing financial modelling and found a pretty good/detailed fillable sheet here: https://www.eloquens.com/tool/zQBT7a/finance/real-...

    It's not the prettiest, but it shines a light on what your ROI and IRR look like. I'm doing some fundraising right now so I want to be very clear what folks are putting their money into.

    0Reply
  • Jacob D.
    OP
    Hurst, TX · Member since 2014 · 10 posts · 5 votes
    8y

    Thanks Trevor! Good Luck! I'm taking next steps too. Keep us updated on your progress.

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