All Forum Posts by: Account Closed

Hi Alexandra,

I did end up buying the property at that price. It's going OK so far. Here's a couple of updates that might be relevant.

1. I'm renting both units for $950 a month. I think its a smidge higher than average for a 2 bedroom in GC, so my applicants weren't high, but the cash flow is better.

2. I totally missed how much stuff would go wrong. In the last year I've replaced a water heater, oven, fridge, oil tank, bathroom vanity...and those are the big ticket items. In other words, I didn't put enough money aside for maintenance, and I think the next property I'm going to walkthrough and TRY EVERYTHING, and make a punch list to fix. 

3. This town floods all the time. They have a combined sewer system and its like, permanently backed up or something. So if you view a property and you're interested, try and time a visit after a huge rain event. See if you have any roofing or basement issues because of that rain.

4. Check flood insurance maps - if you're in a flood zone or near one, it'll affect your underwriting for a loan and they'll require flood insurance. Most major banks will require a NFIP backed policy (mine only needed NCIP) but that adds to your monthly PITI.

Net-net...after a year, I haven't cash flowed yet, but I'm not losing either. I'm literally right on the line. Assuming I've hit all the property issues (I don't know how I haven't...jeeze.) I should be turning coin soon.

If you've got any questions or want to chat, let me know!

I originally posted this a couple of weeks ago with some updated numbers. My initial cash-on-cash seems low, but I can't tell if I have too many dollars allocated towards property management (I'll be managing it myself), CAPEX, maintenance, and vacancy. I am leaning a certain way on the deal and I'm curious to see if other investors align with me or not.

Sales Price: 102,900, 25% down (assuming 5.625% interest rate on 30 year fixed)

C Unit in C Neighborhood, increases in quality could improve rent by $100-$200 p/m, estimated.

Income:

• 2 units, total rent is $1750 per month / $21000 per year

Expenses:

• PITI: $856 per month (444 mortgage, 67 insurance, 345 taxes)
• PM: 10% / $175 per month (I will be managing for the foreseeable future)
• CapEx: 10% / $175 per month
• Maintenance: 8% / $140 per month
• Vacancy: 8% / $140 per month
• Water: Average is $129 per month
• Flood Insurance: (Damn AE zone) is $57 per month (backed by private insurance)
• All other expenses covered by tenants

The numbers

• Cash Flow Per Door of $39 per month / $468 per year
• CF of $78 per month / $936 per year
• COCR of 3.03%

Value Add/My Questions:

• Rents are low for this area -- rentometer, Craigslist, and 2 BR comps indicate 2 bedrooms should be in the 1000 to 1100 range per month. So even raising rent with some sweat equity to say, 925 a month, brings total rents to 1850 and the COCR to 5.5%
• My estimate, perhaps foolhardy, is that PM expenses go back into the cash flow since I am self managing.
  • COCR becomes 12.71% and cash flow goes to $3,924 per year.

For those kind enough to review, I cannot tell if my underwriting on CAPEX, maintenance, vacancy, and property management is too conservative? Is the initial COCR without any value add too LOW to make this worth it?