Newbie Numbers Analysis. Expenses Too High?

Question

Newbie here trying to learn how to calculate numbers. I just picked a property on Redfin for practice called the insurance company to get a quote and asked around for water and sewer prices. However, my expenses based on the expenses I am seriously overshooting the 50% test ($1450 for 50% test vs $2075 estimated expenses). Am I missing something here or these expense numbers are high? Or maybe the figures are over estimates? This doesn't even include garbage, lawn care and snow removal.

Rent estimate based on rentometerhttps://www.rentometer.com/analysis/2-bed/344-sunnybank-avenue-stratford-connecticut-06614/h4Jfk0QRCRw/overviewhttps://www.redfin.com/CT/Stratford/344-Sunnybank-Ave-06614/home/1072262691450 * 2 = 2900

Insurance - Umbrella coverage

142

Taxes

700

Water (was told this could run between 70 and 100)

100

Sewer

60

Vacancy 7%

203

Capex

290

Repairs

290

Property Management

290

Ray Tapay · Answer

@Travis Merrill

I was just going through the other analysis threads just to see and learn what other investors are doing and the advice they are getting and here's a useful nugget I picked up. @Jaysen Medhurst, who seems to be very knowledgeable, brings up a good point in regard to principal, interest, taxes and insurance (PITI) in terms of breaking it up. I recall earlier on you said you put everything together in your analysis.

https://www.biggerpockets.com/forums/88/topics/806957-4-plex-property-scenerioI always break out Taxes and Insurance from P&I. T&I will go up each year, P&I will stay steady (unless you have a variable rate).

Travis Merrill · Answer

No problem, if you have want to talk more about stuff I'm willing to give my ideas on things.

Ray Tapay · Answer

@Travis Merrill

Thank you very much Travis for taking your time to answer and also providing great details on your analysis process.

Travis Merrill · Answer

@Ray Tapay

From what I have read and watched usually people put 100 in each. Id say keep repairs at the 100 but Cap ex it would matter on the life of the roof, foundation problems and bigger end items life.  From what I understand most put the repairs and Cap ex into a high return savings account to about 20k-30k  then invest the extra after that limit into stocks or more property. You should find out the average cost of the roof and foundation repairs for the size of the houses you want to get into.  I know for a house around my area I found from is 10k for a new roof on a 1,000 sq ft house and foundation can be 6-8k per side needed.

I never tried the 50% rule and not to sure on how to make that most the best when the total is already in the mortgage. I would just try to keep things as simple as you can and not add things that are already in something else. What i would do is run the numbers like you are renting both units out so you can see how the total looks and if the numbers work that way.

Here are the numbers I ran with both units rented out.  I put is as a 3.5% down and not the 20% for the house hack and I didn't add in closing costs or rehab so it will add more into it.

Ray Tapay · Answer

@Travis Merrill

Thanks very much for the response Travis. The reason I put the taxes and insurance separately was because I was trying to apply the 50% test in which the insurance and taxes are usually considered in the expenses and the other 50% covered by the mortgage payment. What percentages do you normally apply on your analysis for repairs and capex? From what I'm reading on BP it sounds like the percentage will vary based on the state of the property. Yes my plan is to house hack whichever property I end up purchasing.

Travis Merrill · Answer

Hi, I'm new also and wanted to use this to as a test myself also.  I feel you are lacking useful information to get real numbers on this deal. One is rehab costs you might be willing to put into this project, the closing costs, also from the links it shows as a 4 bed with 2 bathrooms but on the rent it shows only 2 bedrooms so is this a house hack?  What is also helpful to know is on one of the sites it loads 20% down payment so that right or will it be lower then that.

I seen you have real high on the repairs and cap ex.  I also see you have put the taxes and insurance on this list but that is usually add into the Mortgage (this shows in the numbers on the site link you gave). I used https://www.biggerpockets.com/files/user/brandonatbp/file/analyze-rental-properties---four-square-method-worksheetto do the numbers.  I made a excel sheet to make running the numbers faster.  you might want to use this to find more numbers you need to put in.

Thanks for taking the time to read this and posting this for a look at.

Travis Merrill