Rental Property Analysis

[Michael D'Alessandro]

Hello BP Community, I hope everyone is doing well and staying safe! 

I wanted to get some of your feedback/suggestions on my struggles when analyzing deals in my area. I became a PRO Member this morning and have analyzing some deals as practice. I live in the suburbs of Philadelphia, PA and I have my RE License so I was able to set my girlfriend and myself up on listing alerts for single family homes in our area. 

Granted these listings are on the MLS, so I understand that you won't consistently or easily find slam dunks. However, when running the numbers, what I am realizing is that the TAXES are diminishing the cash flow and in turn are reducing the Cash on Cash Returns. To provide some context, I came across a listing below $130k and estimated rents of $1,300-$1,400. At first glance, I thought this was be a solid deal, but after accounting for the standard expenses, the Cash on Cash Return was roughly 6% and the taxes are almost $5k/yr. I realize I could always make a lower offer to enhance the returns. Can anyone relate?

Sorry for the long winded post. Any feedback, advice, or suggestions would be greatly appreciated! Maybe I just need some encouragement and patience LOL. Thank you in advance!!!

Best,

Mike

[Joseph ODonovan]

@Michael D'Alessandro Any expense diminishes cash flow. You can't single out taxes as the reason a deal is bad. When evaluating a deal, you analyze the entire package and if the numbers don't make sense then you move on to the next. There are plenty of good deals where taxes are high but the numbers work. Just like there are bad deals where taxes are low. Keep looking hard and not just on the MLS because deals are always out there. Good luck.