Can these numbers work?

Question

Hey all, so I made the leap and bought a condo (*GASP*). It's a 2/2, mid 1970's building, exterior is decent, faux woodlaminate flooring, open kitchen with granite countertop and bar. Black appliances, small fenced yard, small screened in porch.

Im living here until I can rent.

Let's talk numbers

mortgage - 653/mo = 7836/yr

HOA  - 347/mo  = 4164/yr

Expenses so far 1000/mo = 12,000/yr

Income - 1500/month = 18,000/yr

Vacancy = 1 month  (-1500) = 16,500/yr

Income = 16500 - 12000 = 4500/yr = 375/month

I don't know what the normal estimation is for repairs, however I wouldn't mind putting all of my 375 into a fund just for repairs (at least for a year or two).

The nice thing is that I am going to have a roomate for 3 months who will pay me 500/month.

After that I may have a second roomate for almost 700/month :-O

Comps-

2/2 across the street, similar style buildings - 1490/month (on the phone) 1530 on apartments.com

2/2 townhouse style apt - down the street - 1475-1500/mo

2/2 up street - 1325/mo

2/2 modern duplex - 1900/mo

Rentometer puts the median price at 1700, and the average over 1800, which I think is falsely high

I  have contemplated renting this unit furnished however I am not sure if I  would be able to increase the rent enough to justify the expenses (But I  really don't want to move my furniture hehehehe).

I am fairly sure I could rent this unit for 1500/month, possibly even 1600 (1700 with furniture?!? - wishful thinking).

I was also thinking about personally contributing to the ''repair fund" while living here, maybe 500/month (just in case)

What are your thoughts?

Joe Villeneuve · Answer

Also, don't look at CL for an accurate rent evaluation.  Everyone that knows, and doesn't know, what the rents are list there.  You CAN look at Rentometer, but you need to learn how to interpret the data.

Ignore the average and the gauge altogether.  They tell you nothing important...much like the Zestimate in Zillow.

Look at the map, and specifically the candlesticks surrounding the your property.  That will give you the most accurate "rents" analysis.

Joe Villeneuve · Answer

Who pays property taxes and insurance?

Scott Hollister · Answer

Hello @Richard Burke,

• Did you factor in your down payment as a ROI?
• The "normal" fund for repairs all depends on your market and your type of property. Seeing how your type is a condo, budget for those surprise assessments. 
• See if you can get a hold of what assessments were done in the past, plans for the future and then try to get a cost per year. (Hard to gauge but a rough idea won't leave you high and dry when they put a new roof on)
• As a new investor, I think building yourself that cushion is a wise decision. Save your money in general for the next investment. 
• Rentometer is a quick tool. For accurate rent look on CL or call around locally.

My advice.

• Why move out when you have two roommates paying you more than it costs to live there?

• Save that rental income. 
• Grow your portfolio faster with the extra income?

Richard Burke · Answer

Property taxes are paid in the PITI portion of my mortgage ($653/month), exterior insurance is from the HOA - 347/mo

Interior insurance is under my piti.

Jonathan Wooten · Answer

make sure you factor in the long hall cost. cap ex (long term fixes like roofs and hvac) and maintenance  (a little leak here and there and damage to a wall) Brandon does an in depth analysis on this. since you already own it you can still run numbers to see where you are currently. if your positive, awesome. if your negative, not a huge deal, but think about some strategies. You can always resell the property, you could pay it down for a few years and do a refinance to get a lower mortgage to increase cashflow. but first things firat, go watch that video and see see where you are. remember, if it's negative or low roi, learn where you made your mistake, don't freak out, you still have an awesome asset that you can do tons with.

Richard Burke · Answer

@Scott Hollister, thanks for the reply

The HOA has budgeted for new roof, pavement and landscaping, with each having their ''life expectancy'' budgeted - however things are easily subject to change, and I understand that.

Unfortunately "craigslist housing for rent" in south florida is full of false posts and scams, I experienced this directly when searching for an apartment myself. In regards to rents, I lived further west (read: further from the ocean) and paid 1100 for a 1/1.5 condo (landlord raised rent to 1175 and got new tenant within 3 weeks), to living on the east (read: closer to the ocean). Housing here has gotten very expensive IMO.

I am hopeful that logic dictates: if a 1/1 out west is 1175, than a 2/2 should command 1200+ , but hey, crazier things have happened.

Also, I may have not made it clear, but I will only have one roomate at a time. But still, I went from paying 1100 a month for a 1/1.5 to 1000/month for this 2/2. If I can get a roomate for 700, things will be gravy. Even a roomate for 500/month will be awesome.

I will most likely continue to househack with roomates regardless. Personally I havent really been able to find many places that satisfy the 1% rule (despite high rents). Example- 300,000 house renting for 2300/mo.

In regards to ROI, I dont recall how to calculate, but my down payment was 35,000. Sale price was 138000, closing costs approx 7,000.

My investment was 42000 and I have 4200 Cash flow (before repair funding) than we're right around 10%

Can these numbers work?

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