Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Real Estate Deal Analysis & Advice
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 10 years ago on . Most recent reply

User Stats

33
Posts
5
Votes
Juan Silva
  • Real Estate Investor
  • Kirkland, WA
5
Votes |
33
Posts

First Potential Investment Needs Seasoned REI Review

Juan Silva
  • Real Estate Investor
  • Kirkland, WA
Posted

I'm considering putting an offer on a NOO duplex in Pierce County, WA, and since this is my first time jumping into the deep end of the pool :-), I'd appreciate a review/spot check from this seasoned BP community to make sure I'm not missing anything. Without further ado, here's the annual financials:

1. Offer Price: $199K

2. Financing & Mortgage: 25% down, 30yr Fixed @ 4.625% = -$9194

3. Scenario 1 - Based on Current Below Market Rents:

a. Total Expenses: -$6152

i. Property Tax: -$2652

ii. Insurance: -$890

iii. Maint & Repairs @10%: -$2310

iv. Other Admin: -$300

v. Self PM: $0

b. Gross Income: $21175

i. Rental Income: $23100

ii. Vacancy @ 8.3%: -$1925

c. NOI & Cap Rate: $15023 @ 7.56%

d. CF: $5829

e. CCR: 9.77%

4. Scenario 2 - Based on Increasing Rents To Market Rate:

a. Total Expenses: -$6482

i. Property Tax: -$2652

ii. Insurance: -$890

iii. Maint & Repairs @10%: -$2640

iv. Other Admin: -$300

v. Self PM: $0

b. Gross Income: $21175

i. Rental Income: $26400

ii. Vacancy @ 8.3%: -$2200

c. NOI & Cap Rate: $17718 @ 8.92%

d. CF: $8524

e. CCR: 14.29%

Scenario 1 would be the current reality with Scenario 2 being the upside potential. Am I missing anything from these numbers? Does this read as a good investment on paper?

Thanks for any and all feedback.

Most Popular Reply

User Stats

701
Posts
159
Votes
Bill Jacobsen
  • Salem, OR
159
Votes |
701
Posts
Bill Jacobsen
  • Salem, OR
Replied

I use your interest rate of 4.625% as your cost of money.  I would compare that with your cap rate including property management.  I would want a cap rate of 7.625%.

If rent on a property is $800 per month I am going to base value on that.  If rent could be raised to $1,000 per month because of my efforts I am not going to give the seller credit for the extra $200.   I may give him credit for 1/2 of that.

If rent is $800 per month with a 50% expenses ratio I will value property at $62,951.  I might raise the value to(( $900X12)X.5)/.07625 or $70,820.

I hope this helps.

Bill

Loading replies...