Property Math - Pico Rivera 06/10/2017

[Wesley Kuo]

Hi,

This is my very first attempt to share my property analysis on the forum, and I hope to contribute, if any, to this category of discussion.

I have a rental duplex in Whittier, California. I've been running math on properties that I can find on public listing such as Redfin and Zillow.

Anyway, without further do, here is the detail:

Property: 9504 Maxine St. Pico Rivera, CA 90660 (Redfin link: https://www.redfin.com/CA/Pico-Rivera/9504-Maxine-...)

Asking: $400k

Sq-ft: 1,419

$/sq-ft: $281.89

Cost Assumptions

Purchase Price: $400k

Down pmt: $100,000 (25% as required for investment property)

Improvement: $15,000 (TLC needed per property description)

Closing Cost: $6,000 (assuming 2% of financed amount)

Total Cost: $421,000

Initial Cash Outlays: $121,000

Financing Assumptions

Finance amt: $300,000

Int rate: 4.750% (estimated only)

Mortgage years: 30

Mortgage monthly pmt: $1,565

Expenses (annual)

Property Tax: $5,200 (assuming 1.30% if the purchased price)

Insurance: $876 (based on Redfin estimate)

Maintenance & repairs: $5,000

Utilities: $0 (Tenant pays utilities)

Total Expenses: $11,076

Revenues

Est. Monthly Rent: $2,500

Annual Rental Income: $30,000

Ratios

Cap rate: 4.73%

Cash on cash return: 0.12%

Monthly cash flow: $12

Not sure if it is a good property to buy. All opinions are welcome. Thank you!

[Eugene Rogachevsky]

@Wesley Kuo next time do a quick and dirty calculation to see if it's at least a decent deal before going through the process of finding all expense data.. Gross monthly rent divided by purchase price. 2500/400000=.00625. Taking into consideration all pertinent costs, that's typically a 0 cash flow number in CA these days. Yes,some expense numbers might be higher or lower but essentially you'll get to around a 0 cash flow. And that's why you're at $12 per month. What if you underestimated the interest rate? What about underestimating insurance (non-owner occupied multi-unit)? All of a sudden you're negative cash flow. Negative cash flow = massive trouble. In CA these days it's par for the course to be around .00625. I've been tracking for the past 18 months. That's why I pulled the trigger on my first out of state properties last month. One is a SFR (24% cash on cash) and one is a triplex (29% cas in cash) Both slated to close next week. Like @Josh Gorokhovsky said, what is the best use of your money? If you truly have 100k saved up, that can go a long way to buy you 3-4 100k class B properties in KC, Indy, Memphis, etc and bring in a 9-11% cap. Your money is working smarter, not harder. You can cashflow $1000/mo instead of $12 per month. Hope this helps. Good luck!