I want to analyze a bad deal

[Leon Wang]

Hello All, My name is Leon Wang, I come out from Shanghai/China, I'm an active investor, and grateful to be here to share my stories.Last year I bought 6 condos in Orlando Florida and became a real estate newbie. Here is one of my deal for example: #1,3bed 2 bath condo at 32839/Orlando. #2,Closing price $88K on July/2106. #3, condos were built at yr2000 #4, current rental: $1100 #5, HOA cost $244 #6, Cap rate: 8% When I surf the web in search of sales records , here is what i found as follows: 8/2013, $80,900 10/2009, $42,500 11/2006, $428,000 My question is what was the rental back yr2006? How was the cap rate at that time? The other question is how should I know whether or not I have over leverage my property and will possible generate negative cash flow? Is there anything I can learn the lesson? I appreciate everyone who can let me know what's your thoughts, have a great weekend.

[John Kent]

@Leon Wang $500 per year is low for CAPEX, even on a condo. That should probably your Maintenance budget not CAPEX.

Total Annual Debt Service - Cash NOI = Net Income. If Net Income is negative then you have negative cashflow. If Net Income is positive than the monthly rental rate can go down (Net Income / 12) before reaching negative cashflow. There are a few spreadsheets in the Bigger Pockets file section that can be used to analyze your properties cashflow. You can plugin different loan numbers. https://www.biggerpockets.com/files/spreadsheets/category?page=1

I suggest using 1 (8.3%) month for vacancy in your formula. Rentals go quickly here but there is usually a rental fee to cover.