Condo rental analysis

[Kay Kim]

Hi

I am a newbie investor who's trying buy his first investment property. I looked around SFR around my area and it's really hard to find one with more than 100 cash flow and 12% CoCROI. I have read several posts that warn about investing in condos for rental. This condo that I am considering shows 12.5% CoCROI if my calculation is correct. Since I am new and I don't want to dive into something that has bad potential that I am not aware of right now. Can you experts please check my math and give me your opinion about it?

###

This is 4br/4ba condo for college students. I am planning to rent each room with bath to individual students and kitchen and living room area will be shared.

### Facts on the condo

Bed: 4

Full bath: 4

Year built: 2015

Occupancy rate: pretty good (Students seem to have hard time getting into this complex)

Rent income: 450 * 4 = 1800

### Price

Sale price = 120000

Down payment = 24000

Closing cost = 5000

Rehab = 0 (It doesn't look like it needs anything to get it ready for rent. It looks ready.)

Cash out of pocket: 24000 + 5000

### Expanse per month:

HOA = 170

Utility = 250 (I got this number from the owner of another unit in this complex.)

Repair = 100

CapEX = 100

Vacancy = 100

Management = 100 (It will be pay to myself for a while.)

Tax = 1700/12 = 141

Insurance = 50 (This is estimate. I assume condo insurance is cheaper than SFR insurance.)

Mortgage P&I = 486

### Numbers that matter

Cash flow = 303 / month

ROI = (303 * 12) / 29000 = 12.5%

[Lisa Hoover]

Dear Kyung,  Beautiful calculations and I think you could go up on rent and I really like Gerald's idea of adding internet basic cable.

4 leases right? not 1 lease w/4 people.

HERE'S My strategy and why.

I don't have the time or money to work with low end properties (under $90) because of the tenant quality, the damages they cause and cleanup of high turnover, chasing them for rent, and often not in the safest areas.

$110-120,000 is at my bottom.

Luckily i'm in Charlotte, NC and i can get condos/townhomes on the golf course at $110k.

I ALWAYS hunt for the lowest priced props in the BEST areas-period.

FOR CONDOS/TH I cap HOAs at $250 max. and that has to include water/sewer for over $200 ( most here are about $180).

Recently I've purchased nice townhomes here in the best areas and

increased MY  CASH FLOW 

PROFIT by $500 a month !!!! by renting as "furnished"

I put in a nice USED : sofa, dining room table-chairs tv, internet, silverware, toaster, bed frames w/ mattresses and lots of pads and covers to seal them!

Maybe you could add a used w/d?

College kids can be profitable, but i'd screen , get deposits, do inspections every 3 months min.  AT UNCC, the kids used to grill on the decks of their condos and big fires were COMMON. Eventually this beautiful new entire complex was bulldozed.

I think i'd do Japanese style w/microwave and hot plate--no stove!! and no grills allowed.  TRY for non-smokers.  Never Carpet-  go with laminate flooring.   MOUNT A FIRE EXTINGUISHER somewhere!

My 18 yr old is just getting comfortable with using a washing machine-- so no way most of these kids even know how to use an oven or burners.  Let them bring their own dorm-size refrig.  Tell them you spray for bugs for up to 30 days after they move-in and after that you charge them --explaining that they have to keep the TRASH OUT, decent housekeeping is expected.

If possible-- maybe market as an all GRAD student condo?

Also if there is a fireplace or gas heat install CO and smoke of course. 

 HERES A TIP!!!

I cannot believe how IDENTICAL A CO MONITOR LOOKS LIKE A SMOKE DETECTOR.

Recently i had to return 

several to Home Depot --the pkg said  Fire&Smoke and I was trying to buy all  10 CO&SMOKE COMBOS.

Got the wrong ones. 

I went back to my policy of SEPARATE CO detectors (no combos)

I take a magic marker and draw faint BLACK STRIPES across the CO.

I draw faint RED STRIPES across the fire/smoke. AND I TEACH EVERY TENANT (3minutes) the difference in these 2 monitors.

They take the batteries out immediately of any chirping detector and beat it with a broom whatever to stop the chirping.

Fine. It's a $25 detector.

But the black gray stripes mean DEATH and open all doors and windows and I MUST BE NOTIFIED IMMEDIATELY anytime of day or night or they are in DANGER of DYING.

I must do a REPAIR.

They follow that mini-class. You'll find you have to think FOR THEM.

If there is a dishwasher-know in advance they think ALL SOAP IS CREATED EQUAL and every new tenant you get is going to use laundry or liquid soap to suds up and flood the kitchen  via a dishwasher.

So lots to do even when you so carefully choose the right investment by the numbers---all these PREVENTABLE expenses can nix your best calculated proforma.

Best Regards to you-- it's fun, exciting, never boring and can be extremely profitable : )