Rental Expenses as % of GOI

[Stephen Seaberry]

Hi everyone,

After watching the webinar on getting started in rental property investing, I followed @Brandon Turner 's advice and have been completing 3 analysis per day. Some things are standing out to me, but they are better suited for a different post.

For this post, I'd like to solicit information from investors, agents, or anyone with their finger on the pulse of the Baltimore rental market. Specifically, typical expenses as a percentage of GOI for Howard Park, Barclay, and/or Greenmount.

As I'm going through completing a deal analysis, I'm left with a void for what other investors are paying for things like:

Insurance

Repairs

Vacancy

Electric

Trash services

Water

I know, I know. I'm also reading The Book on Rental Property Investing by B. Turner and, ironically, I'm on the chapter about forging relationships in order to have insight to just this type of information. Following his wisdom, I should be out in the world making these connections, perhaps not taking a "shortcut" on BP. My catch 22 is perhaps through this post the forging of said relationships will take care of them selves...who knows.

Lastly, since I'm exploring several different markets, if anyone has similar insight on Indianapolis, Kansas City, and/or Toledo, I'd appreciate any feedback you got

P.S. - If the neighborhoods I've scouted are less than Cs please let me know. I've went up to Howard Park during the day to look at a few listings and the areas seemed ok. Can't say the same for the Greenmount area.

Anyway, I appreciate your time and feed back on the matter. 

[Levi T.]

Originally posted by @Stephen Seaberry:

@Levi T.

Thanks for the feedback. I'm entirely new to all of this, so that was incredibly value to my understanding. On one listing stood out to me as it had a CoC of 13% using the following breakdown

Vacancy - 8%

Repairs - 5% as the property was recently rehabbed, but still probably too low

CapEx - 12%

Insurance - $50/month (entirely spitballed)

As it is a SFR, I anticipated the tenet would pay for garbage, electric, etc. But now that I think about the area as it is low income, I don't know how practical that would be.

Said that to say this. I reached out the broker listed on the Redfin listing and asked for the APOD. Radio silence...

How does one overcome unresponsive realtors to get to the seller to get this data? This was literally my first attempt to make contact and it returned this result. So, obviously if there is an alternative approach I'm all for it.

Vacancy and Repairs each need to be 10%, don't go below that. Being a SFH they should be paying their own utilities, so checkout some local rental listings to see what others are including in the rents (Craigslist, Zillow, etc). Check RentoMeter.com to see what rents are going for as well.

Did you ask the agent for "APOD" or "Annual Property Operating Data". They likely have no idea what you asked for if you said APOD. I would just be direct and say you want to buy the property, and need to know what the average utilities cost is. Keep things basic.

As it's already listed, I would find a agent you trust, and can always work with. Have them get the data from the listing agent for you. Likely a good number of very smart agents on BP that could be a good resource for you when it comes to buying MLS properties and investing over all for your region. The seller is paying their commission, so might as well use someone you like vs using the agent that represents the seller more than they represent you.

Here is a good article on figuring out CapEx: https://www.biggerpockets.com/renewsblog/2015/10/1...

I'm working on 3 properties right now, I'll provide detail on one of them.

It's a town house that I did find on MLS last week, which is not normally how I find them as I do yellow letters. In terms of price to value and CoC, it should give you a good idea. Personally I want my cap rate at 12% or better, so you know my CoC is much-much higher.

Tenants pay the utilities, in their own name. I always take off 10% management, 10% vacancy, 10% repair. Commercial insurance is $550 year, taxes are $300 year.

Bought for $60,000
Rents for $950mo.

For the above. After the 30% (10%10%10%), and insurance, taxes, but before debt services, we net $7,040 a year. Lets say your debt service is costing 7c on the dollar. You cash flow $2,840 per year. Since the ARV is over $85,000, we only needed 10% down as our total cost in below the 80% ARV mark, so $6k cash (You will likely need 20% down no matter what, till you build a track record). That puts our CoC at 47.33%.

Hope that helps!