How to analyze an owner condo conversion to rental

[Ronald Valverde]

Hi all. 

I'm new to the forums and starting to dip my toes in Landlording this year.

How should I analyze my live in condo owned for 9 years. I feel it should be calculated differently from a new investment? I'd like to obtain pure cash flow and cash on cash. I've plugged in the numbers into calculators but it doesn't seem right. Appreciate detailed calculations and clarifications on if/how this is calculated different from a new deal. Posting all the info I can remember. Let me know if need more.

Location: Secaucus NJ

2 bed 2 bath with balcony on high floor. 1396 sf.

Paid $284k with 20% down and approximately $13k in closing, including 2 months maintenance fees $1470 total, and mortgage broker fees approx $3k. Mortgage 15/1 arm at $3.375% with max 4% interest increase due 15 years from July 2015 (Aug 1, 2030).

Current condo monthly maintenance fee : $1036 includes water, amenities (pool, tennis court, concierge, gym, sauna, community room with pool and ping pong, maintenance)

Current monthly mortgage payment: $499 interest, $504 principal 

Monthly taxes and insurance: $459 

monthly contents insurance: $38

Past Assessments: $11k for building HVAC upgrades $8k for building updates and building reserves

current market value $400k - $425k

current  monthly rental median: $3100-$3200

monthly landlord insurance: $45

I'm also trying to decide if I should rent or sell and invest elsewhere.

Appreciate all insights.

-RV

[Bradley Buxton]

@Ronald Valverde

What are your inputs (Rental Income) minus your expenses? The result is your income or cashflow. Other forgotten expenses are vacancy, repairs, and HOA special assessments. What is your exit plan for this condo? What is the plan when insurance rates or HOA fees go up? Can your equity be deployed into another investment that produces more cashflow? Are rents going up in your area? Are there other newer condos being built in your area that might lower your rents or raise them? Run the numbers on a few scenarios.

[Ronald Valverde]

Quote from @Bradley Buxton:

@Ronald Valverde

What are your inputs (Rental Income) minus your expenses? The result is your income or cashflow. Other forgotten expenses are vacancy, repairs, and HOA special assessments. What is your exit plan for this condo? What is the plan when insurance rates or HOA fees go up? Can your equity be deployed into another investment that produces more cashflow? Are rents going up in your area? Are there other newer condos being built in your area that might lower your rents or raise them? Run the numbers on a few scenarios.

Hey Bradley
Thanks for the feedback.
I've run most of those numbers but I'd like to calculate what my cash on cash is and I'm not sure which numbers to use. Are the numbers from the purchase price from 9 years ago still valid if calculating return today? Do I include closing costs even if those included several months HOA fees in advance and same for taxes? Seems like the numbers get thrown off. So how do you calculate that after 9 years of owning, how does the equity come into play since most of the calculators assume it's year one with no equity, and how do I factor in the already paid assessments besides that it's increased the cost of the property? 
To answer some of your questions
Gross monthly cash flow is $3200 rent - $2550 expenses = $650 
Yearly cash flow= $7800
Vacancy 8-10% is close to 1 month's rent so = $3200 yearly
Repairs: 5x rule = $576 yearly 
CapEx: 1% of property value yearly= $4,000 (includes Special Assessments)

Once I deduct vacancy, yearly repair budget and capex estimate I'm breaking even, but is that real? $7800 - $7776. And does this mean it's not worth renting?
This assumes I will actually spend all this money. So in this scenario the only profit is in the yearly appreciation and increased equity of $6,000 per year of principal payments.
Exit Plan is to sell, take the equity and likely use in another investment.

If I sell now instead of renting the upside I see is pocketing $85k in appreciated value after paying real estate fees. And taking out my equity of about $110k. Total I recover in cash would be around $195k after paying the bank loan and real estate fees. I've lived in the condo so I would be exempt from paying taxes on Capital gains up to 250k.
However I'd be letting go of a low interest loan of 3.375% which is tough to get in this market.
I would like to purchase more properties so I feel that having this first one will be useful to show lenders.
Am I missing anything else?
Is it worth renting or is selling better and finding another asset?

Thanks, 

Ronald