All Forum Posts by: Bryan P.

After learning about cash return on investment and debt service coverage ratio, it seems to me that a nearby city to me, Harrisburg, PA, would be an optimal place to achieve the appropriate numbers.

I've been told 2.0 for DSCR is solid and Cash ROI above 25% is a good target.

In Harrisburg, properties can be bought for 15,000 with 7,000 put into them with potential rents of 800. With teh appropriate financing terms, that would be close to the targets I mentioned above.

This is much more appealing than properties in my current town which can be bought and repaired for 20,000 but can only rent for 500. Rent doesn't get much higher around here.

Do any of you target city low-income type areas to meet these targets? (Not talking about war zones, just in general).

If I had my rental property for a 30 year fixed at 6%, the DSCR would be 1.70.

But because I only have it for a 10 year note, the DSCR is 0.63.

Ok-makes sense. The terms are thus a hugely important part.

David,

You target DSCR at 2.0!!?????

That would be the equivalent to renting at 900 dollars with a 300 PI.

How do you get 2.0 LET alone 2.5????

Do you put down alot of cash that allows this number to that high?

David-

What is a target "True ROI" for 500/month type properties?

You mentioned the Cash on Cash target at 25%. Ok-got it.

The Debt Service Coverage ratio is a little confusing. So if I have a PI of 400 and Net Operating Income of 100, the DSCR is .25. I have no clue what you're talking about....2.0???

Another question....

Can you theoretically buy more and more properties if it each property bought meets the definition of a good deal (whatever that would be to you-I'd be interested to hear how you determine) and the 50% rule?

In other words, are properties self-sufficient if the 50% rule is met?

So you're saying a PI at or below 50% gross rents is only one part of the game? If so, I catch what you're throwing down.

The next property I buy I will make sure I don't put myself in this predicament again. I wish I knew this when I bought the properties.

On both properties my PI is about 67% of gross rents. The extra 17% is the concern (per the 50% rule).

The current rates on both properties are around 6%.

Ok-if the "TI" part is a portion of the 50%, then I stand at 33%.

That extra 17% has to come from somewhere. Is it better for me to pay for that 17% with my personal income and equity? Or is it worth paying the few thousand to refinance and solve the problem in that way?

-bp

The other question is...

IF 30 year refinance terms are available for rentals, is it worth the 3000 dollar hit to refinance? Logic says I'm going to pay 3000 in expenses, soon enough, if I keep negatively cash flow like I have now.

-bp

JScott-

I think I understand this properly. I might cash flow 100 per property, but that's not cash flow. That "cash flow" will go out the window soon.

I need to get my PITI at or below 50% of gross rents. Thus, I need the PITI to be at, or below, 300 for both properties.

If I don't, I will learn a hard lesson, at least that's what it seems based on the information I've learned.

I need to figure out whether or not 30 year terms are even offered for rental properties.

-bp