All Forum Posts by: Brad Bellstedt

Although, I should add that $250 of excess over the mortgage payment won't be enough to cover your maintenance costs, cap-x, and vacancy costs in the long-run so you may have to operate at a slight loss for a couple of years until you can either pay off the HELOC or you can charge closer to $4,400/month. (That covers mortgage, HELOC, 8% vacancy, 5% maintenance, 5% CAP-X, and 8% Management. If you self manage, you can deduct that 8% from your total needed rent and still cover the other 5 items mentioned)

RENT! If you ever plan to go back to California, the barrier to entry is much higher than it is here in Vegas. It' not often I come across someone who has sold to move to Vegas and then wishes to move back to California but for those who do, it can be very difficult to get back into the California market. If you are lucky enough to own California real estate and there is even the slightest possibility you may want to go back, hold onto that property. The extra monthly cash in your pocket and options for your living situation should you decide you want to go back, may be worth more than most of the other options you have for that money. 

You will also need to know how much each unit can rent for. You can do this by looking up recently leased properties that are similar to the one you are looking into, in the same location. If you were in Nevada, I could double check your numbers for you. I have MLS access but only in the state of Nevada.

It's pretty self explanatory. The only number you won't be able to pull from somewhere is the homeowner's insurance. A lender friend of mine (here in Vegas) tells me they calculate by multiplying the purchase price by .0033 to get a fairly close estimate of the yearly premium rate. As for the vacancy, maintenance, cap-x, and management costs, I use 8%, 5%, 5%, and 8%. 8% vacancy = 30 days. Homes in Vegas are not all that old and most have been remodeled (or will be before they are leased) so 5% maintenance works. 5% for bigger items (roof, A/C, water heater, etc.) is just an estimate. It does work out fairly well for an estimate but should be adjusted once the usable life of these items has been calculated. (Example, you know a roof is good for 25 years and costs $25,000 to replace, so you should budget $1,000/year of your rental income towards the roof, A/C, XXX, whatever.) Finally, 8% management fee. I know 10% is most prominent but here in Vegas we can find a couple of PMs for an 8% fee. Hope that helps!

So what's the plan and how do we get started?

@Greg Dickerson

Do you keep that response saved somewhere for copy and paste? It's a great response and very informative. I see this question A LOT so it makes sense to make up 1 really good response and then copy and paste it every time the question comes up. Thank you for participating. 

In Vegas, when I run the numbers for SFRs (post renovations or no renovation at all) I use 8% Management, (there are a couple here offering 8%) 5% maintenance, 5% Cap-x (4-8 depending on age but usually a 5) and 8% (30 days) for vacancy. The properties here are newer than in most parts of the country, (1950 at the oldest but most are 80's and newer) and our rent rates are relatively high so 5% is typically $65-$80 range, which over the long run adds up to be enough. 

A lender friend of mine told me they multiply the purchase price (or ARV if you refinance post-reno) by .0033 for the yearly premium for homeowner's insurance. It seems to be pretty accurate here in Vegas but we don't have hurricanes or floods or termites really so I imagine that's relatively low on a national scale.

Did you include the mortgage payment in your calculations?

You really shouldn't. If that person is dedicated to you, you should be dedicated to them. Now if that person is not living up to your expectations, that another story but you should only see properties with the agent you plan to write the offer with. (And don't write your offer with just any agent who happens to be available on a Saturday. Your agent can do a lot for you so be sure to get a good one.)

OK. You should study up on "subject to" offers. (subject to the existing financing) What role are you looking for the partner to play?