Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
8y
@Josh Crockett What I'm saying is, when you analyze properties it's helpful to look at them like they were fully financed. If they cashflow then, that's great. If they don't cash flow when fully financed or it's break-even then the money you are putting down as your down payment (i.e. 25% in your case) is basically you purchasing the cashflow you get when you put that 25% down. Ideally you want properties that cashflow when fully financed because that means that if you spent $0 you would still cashflow.
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
It's difficult to tell from the report, but this is a duplex but the comments only reflect the one side. It's a mirror of itself which is why you see "3 Bed / 2 Bath" in the description, but the report has double those. Thanks in advance BP!
Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
8y
@Josh Crockett I think your vacancy is low, typically I use 8%-9% as over 12 months that gets you to about a full month's rent. CapX at 5% also seems low, but since the property was renovated in 2011 maybe it's appropriate, just be careful there. After taking into account an increase to 8% for vacancy and 10% for CapX you're basically just buying cash flow. If you fully financed the $168,300 @ 5.375% you'd be looking at around $942/month in P&I, which when taking in conjunction with the increases I mentioned in vacancy and CapX basically leaves you net $0. Just my thoughts on it, since I'm not familiar with the property in question
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
@Kevin S. thank you for taking a look! I'll rerun with a few numbers bumped up. What do you mean "if you ugly financed $168K @ 5.375% you'd be looking at $942/month." For an investment property I have to put 25% down so P&I go to ~$700. Just trying to make sure I'm following you here! Thank you again for taking a look!
Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
8y
@Josh Crockett What I'm saying is, when you analyze properties it's helpful to look at them like they were fully financed. If they cashflow then, that's great. If they don't cash flow when fully financed or it's break-even then the money you are putting down as your down payment (i.e. 25% in your case) is basically you purchasing the cashflow you get when you put that 25% down. Ideally you want properties that cashflow when fully financed because that means that if you spent $0 you would still cashflow.
Real Estate Agent · Alpharetta, GA · Member since 2017 · 151 posts · 76 votes
8y
@Josh Crockett I agree with @Kevin S. . Your vacancy, cap ex, and repairs look a little low. I know a lot of buyers agents send running these at 5%. It being newer could change that but if you plan on holding long term all these items will need to be replaced anyway so best to run your numbers correctly now. Typically like he said 8-10% for each of those. Rerun your numbers and see how it looks. Looks to me like $170 month cash flow (at 8%) which is a little thin.
Investor · Indianapolis, IN · Member since 2015 · 270 posts · 217 votes
8y
I do 8-12% vacancy on multis depending on area.
Capex should be higher, presumably you have two HVAC systems, two breaker panels, etc etc.
Also, leasing fees (I don't understand why nobody includes these - they can be substantial especially on a multi which is generally going to have higher turnover than SFH).
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
Guys I really appreciate the help. As I'm reading this I'm wondering what kind of property can support an 8-10% rate on Vacancy, Repairs, CapEx and at $0 down can generate income but this has given me a new set of criteria to consider beyond what's being taught in the videos/webinars. I appreciate you guys teaching me as one of the young guys still trying to get my footing!
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
Follow on question here @Kevin S. So when you run the "0%" down and leave the interest rate what number are you looking to have in CoC % and monthly income after expenses? Just anything in the positive? In this case I have to get into the $157 range to make that work and I can't see the seller doing $23K off the sale price to get this where you're talking about. Thank you for taking a second more to help on this!
Accountant · Tulsa, OK · Member since 2018 · 312 posts · 349 votes
8y
@Josh Crockett Everyone is different on what they look at CoC, CF, etc. but when I'm doing that I'm most concerned with cash flow since my strategy is long-term buy and hold. That being said, I still look to see a positive CoC %. If you're dead-set on making a down payment like you talked about, I'd be looking to get your CoC % above the average of the S&P 500 long-term (i.e. greater than 10% annual ROI) otherwise you might as well just invest the money in the market rather than RE.
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
@Kevin S. I too am trying to get into long term buy and hold. When you say "If you're dead set on making a down payment like you talked about" is there an option? I didn't think when purchasing an investment property conventionally you could get around that? If you are doing creative financing I could see some options but is that what you're talking about? This conversation is coming in a timely fashion for this house, again I really appreciate the insights.
Newport, RI · Member since 2018 · 24 posts · 8 votes
8y
I also wanted to ask you guys, how long do you run Vacancy, CapEx and Repairs and MX for? Is there a certain dollar figure you target where you pause contributing to those funds or do you run them forever? Thanks for the knowledge in advance BP forum!