DFW Analytics Model - Revenue / Expense Assumptions

[Jacob D.]

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!

[Ryan Blake]

@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.