I have been working with many people who are just trying to get started with real estate investing. I won’t pretend to be an expert by any means as I have only been at this for 4 years and have 5 properties, but I thought it could be helpful to share actual numbers and different ways to look at them. I find I learn best when I can see real examples vs. hypotheticals. The data below is from an actual rental I purchased March 2024 in Sheboygan, WI. At that point in time the market was still hot for properties at my price point in my buy box. This property was also an on-market deal.

The property was a 4 bed/1 bath single family house. When we purchased it, it was fully renovated and set up as a 5 bed/1 bath Airbnb. We decided to market it as a 4 bed/1 bath with an office.

Listing Price - $199,900

Property Taxes - $2,230.13

Assumptions

Purchase Price $230,000
- In this case I had seen similar properties selling for $225K - $250K so I felt the property was listed low to drive up interest. Also, at this time I had seen properties selling for 10 – 20% over ask regularly.
Interest Rate 30 year conventional 7%
Homeowners Insurance = $1,000 annually
Rents = $1,800 per month

When I looked at those assumptions, I would need to put down $80,000 on this house to get it to hit my cashflow goal of $500 minimum per month which equates to 35% down.

Total mortgage + escrow = $1,267.13 per month with rents at $1,800 my monthly cashflow is $532.87.
- From my experience, after taking out vacancy and maintenance costs you are left with around 73% of that total cashflow number once the rental is established.

People have asked why a $500 per month cashflow goal. The answer is its personal preference. I want enough money coming in so the business can sustain itself when issues occur with maintenance or vacancy.

If you wanted to do this with only 20% down ($46,000), which is all you need for a conventional loan, here is how the calculations change.

Total mortgage + escrow $1,493.33 per month with cashflow reduced to $306.67 per month.

I prefer to overestimate purchase price, interest rates, and homeowners’ insurance to be conservative. In the same token I go on the low end for rents to stay conservative. If the numbers work when I run them, I know reality should only be better.

Actuals

Purchase Price $227,500
Interest Rate 30 year conventional 6.375%
Homeowners Insurance = $920.21
Rents = $1,900 per month

Total mortgage + escrow = $1,182.58 per month with rents at $1,900 my actual cashflow is $717.42.

Additional numbers behind the deal

Total cash to close = $87,475.55
Down payment = $80,000
Homeowners Insurance - $918.36
Rate Buy Down 1.283% - $1,892.43
- We paid to lower the interest rate by 1.283% over the course of the 30-year loan. This wasn’t a required expense.
Property Taxes - $926.88
- We put in the offer to pay the full years property taxes vs. split them at the time of the sale. Normally you are responsible for the portion of the year you own the house, and the previous owner is responsible for the time they owned it. We put this in our offers to differentiate ourselves from other offers and we can write off this expense as a tax deduction. This increased this cost at closing.
Additional closing costs fees - $3,737.88

I share this to let beginners know that you need more than the down payment to close. Some of my costs above are optional but not all. I normally estimate an additional $5,000 to close.

Hopefully this information helps those who are wondering about costs and deal analysis just trying to get started. If you are looking for more details or need help getting started don’t hesitate to reach out. I have built calculators to tackle more of the heavy lifting for me at this point.

Paul Novak

[email protected]

(920) 226-4408

Milwaukee, Wisconsin

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