Analyzing a deal on my first rental

[Jared Smith]

Would love some feedback on a property I just put an offer on:

$130000 price tag

Putting 25% down

Taxes are $1676

Has an adjacent dwelling on it so the total gross rent income is $1450

Property Manager is charging me 10%. No tenant placing or vacancy fee.

The home is in great shape with tenants already signed for 9more months.

5% of monthly cash flow for maintenance.

interest rate is at 5.375%

Am I ignoring something?

I feel like this deal is gonna cash flow about $460

Would love to find out if I missed the boat somewhere..

Thank you!

[Vincent Pollitto]

Hey Jared I'm visiting Utah asap I heard its absolutely beautiful out there. I'll come and we'll shop real estate. 

These numbers will vary based on the age of your home and location but usually standards that may be used are the following:

Repairs - 8%

Cap Ex - 8%

Vacancy - 5%

Management - 10%

Miscellaneous - 2%

If you have an older home (any home built before 1978) it would be wise to take out a little bit more for repairs. I would come in around 8-9%. You also should factor in Capital Expenditures (Cap Ex) for the replacement of major systems. For example if you need to replace all the plumbing in your home that would be quite costly to pay for out of pocket. Pull out 8-9% of your gross rent to account for Cap Ex. Additionally, at some point in time your home will sit vacant. Talk to a local agent or investors in your area to find out what the vacancy rates in your area are. Could range from 5% in major cities to 10% in some suburbs. Deduct your monthly mortgage payments, taxes, insurance, repairs, cap ex, management, vacancy, misc. from gross rent to obtain your monthly cash flow. Best.