Property Rental Analysis

[Priya Gohil]

Am I doing this right?

Property: https://www.redfin.com/NC/Char...

Analysis https://www.biggerpockets.com/...

Couple Questions / Notes:

1. For property tax and homeowners insurance I used what was listed on Redfin. Should I be getting these numbers elsewhere, and if so where is the most reliable source of info?

2. Interest Rate, I'm also not sure on. I am from California and I want to invest out of state. In this scenario, looking into North Carolina. I believe interest rate is 0.77% from google. Not sure if this different if it is an investment property and/or if it is different if it is someone investing from out of state.

3. So if my initial analysis is correct, I'm like okay I gotta see if I can make this deal work, but when I change Purchase Price, the only other metric that updates is the loan amount. Not sure how I can make this deal work, if I wanted to. This doesn't include CapEx.

Also I ran through couple of analysis for different area, i.e. Orlando per Bigger Pocket article on the hot market, but even then I'm getting a negative Cash Flow. I'm not sure if I'm using the calculator right or I'm experiencing what everyone is saying is that deals are hard to find right now and things are just way more expensive.

#Newbie
#PleaseBearWithMe

[Chris London]

@Priya Gohil

1) The current property tax rate on Redfin is correct and fine to use in your calculator. The assessment they use is from 2019. Note, when they reassess your rate will go up an estimated $83/mo (to about $350/mo). The homeowner's insurance Redfin lists is too high as they assume you will reside in the property. You would get a landlord policy for the property which covers the 4 walls + liability insurance. The tenants would use rental insurance to cover their personal property. While insurance can vary based on factors including your past claims, I personally would use a monthly number closer to $50/mo for that property.

2) Interest rates for an investment property with 20% down and a conventional loan assuming the borrower has good credit and a good DTI (debt to income ratio) should be closer to 3.5%-4.5%. Make sure to get prequalified and your lender can give you a better idea of your rate (which varies by day). You will need a prequalification to submit your offer. I recommend using this daily mortgage rate website to keep up to date on which direction rates are heading. It won't give you your exact rate but it will give you trending direction: http://www.mortgagenewsdaily.c...

3) I show that your monthly PITI payment on this property (making a few assumptions) should be closer to $2124/mo. Add in 10% management = $220/mo, + 5% maintenance =$110/mo, + 5% cap-ex =$110/mo + 5% vacancy = %110/mo and your total monthly cost is $2674/mo. This means based on your rental rate of $2200 you would lose $474/mo.

Finally, here is an opinion and not math so take it FWIW, ...I also moved from California (West LA) to NC, and while $424K for a 2 bedroom townhouse sounds inexpensive compared to Cali that is really expensive for a rental in NC. You are not going to find a wide funnel of renters looking to spend over $2K for a 2 bedroom condo/townhouse. Having a wide funnel of highly qualified applicants is always what I want out of my rentals and for that reason, I look for the sweet spot of rent in a city. In Raleigh/Durham that number was closer to $1500/mo and in the last 18 months has climbed to $1700-2K/mo. I'd suggest working backward from here and finding and finding a property with a piti payment that still leaves whatever cash flow you're looking for along with appreciation (which is always speculative).

Good Luck