Account Closed Of course.. its a pretty simple concept to get your head wrapped around. A class areas - They are your super nice areas where you should be able to rent your property out to great easy tenants that make a lot of money... Usually your highest walkable areas with nice restaurants and bars around as well.. B Class - Would be one step down... Maybe a suburb not too far from the heart of your city with great middle to upper middle class tenants.. C class - Starts getting a little sketchy here but I wouldn't consider these area to be "the ghetto".. I tend to love C class areas.. They usually cash flow very well and if you can find a great C class cash flowing property that stand in line for appreciation you have a winner in my book. D class - Take a gun when you collect rent. A lot of investors will determine an all in price (purchase and repairs) for a property from its rent and class. A class - 1% B class - 1.25% C class - 1.5- 2% D class - 2+% So in an A class area if the total all in cost is 100k you would want about 1k in rent.. But it is just a rule of thumb and you should run your numbers to confirm cash flow.

Can you explain the different class areas in more detail? I am not aware of these classifications and what it means. Thanks

I would love for you to invest in TN as well. That way I could wholesale you some great deals (:

obviously I would love to invest in place like Tennessee which can easily cash flow for 200 a month.. but its much further away..

@Brandyn Duff Why yes sir I do know the 1% rule isn't the end all be all.... but its a good eyeball test for a reason. Well you do have more info to help people help you evaluate the deal. Peachy. I wouldn't pull the trigger unless I am cash flowing at least 200 and thats with the property management 10% factored in. They only way I could justify this property to myself is if it was in an area that is set to appreciate drastically, or in an amazing A class area. If this is a C class area I would run away fast. It looks like you have ran the numbers well and if you are happy with 150 a month without getting paid for your time managing the property then move forward with confidence.

@Micah Copeland You mentioned the 1% rule of thumb.. not the end all.. If I did my calculations right.. It should cash-flow $154 a month after all expenses. 10% of 1000 = 100 a month for Repairs 10% of 1000 = 100 a month for Cap Ex Property Tax: 750 a year Insurance: 300 a year Morage with PITI = $510 @ 4% If we follow the 50% rule.. Its about 1000 *.5 = 500 - mortgage which is (- $100) Another rule of thumb I ran the numbers and this is what I put 10% vacancy rate ( I put it high, i think its closer to 7) Revenues Rental Income 1,000 Vacancy/Loss Rate 10.0% Vacancy/Loss Value (100) Gross Income 900 Expenses Property Taxes Annual 744 Insurance Annual 300 Maintenance & Repairs Annual 2,400 Utilities Annual 0 Advertising Annual 0 Administrative ( I just added this for some reason) Annual 150 Variable Cost PM (% Income) 0 Fixed Cost PM Annual 0 Other 1 Annual Other 2 Monthly 0 Total Expenses Expenses as % of Gross Income NOI (Cash Available) 493 Mortgage 421 Total Cash Flow 71 Cash ROI CF & ROI (Doing My Own PM) Annual Cash Flow $2,153 Cash ROI 5.90% Total ROI 10.15%

@Brandyn Duff I don't believe anyone can give you great advice without more info.. What area class is it in? An A,B,C, or D class area? I don't understand what you mean in I did 10% repairs and cap ex expenditures and the vacancy part when you just listed rent at 1k? Did you take out all of those percentages to get to 1k or is the 1k before you have taken out all said expenses? If the purchase price is 117k and rent a month is 1k it doesn't even meet the 1% rule so I would immediately pass.

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Updated almost 10 years ago on 04/15/2015. Most recent reply

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Brandon DuffPoster

Investor
Dallas, TX

Real Estate Deal Analysis & Advice

Property to buy?

Brandon DuffPoster

Investor
Dallas, TX

Posted April 15, 2015 08:47

Property listing price is 117,600 Property tax : 750 yearly Insurance is 300 a year I did 10% repairs of monthly rent 10% for cap expenditures of Monthly rent Rent 1000 Vacancy is 10%

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