All Forum Posts by: Dennis Robinson

What I can calculate easily is your rent to cost ratio, excluding closing costs: $755K for $5K rent = 0.66%. I use what most investors would consider conservative pro forma. In my market, virtually all C class and above I project initial positive cash flow at 0.75% (80% LTV). Most RE I project positive cash flow at 0.7% (80% LTV). By initial cash flow, if all costs stay fix forever then I have positive cash flow forever. In practice, the rents appreciate more than the non-fixed costs and therefore cash flow improves over time.

There are variations in properties and their associated expenses, but I would think it is likely that you have either very modest positive cash or modest negative cash for (so about cash flow neutral) at 80% LTV if calculated with my pro forma numbers.

As indicated, historically the cash flow improves over the long term from the initial cash flow position. Finding properties that have a ratios above 0.75% is challenging in my market (but I just closed on one over 1% ratio if calculated using market rent). This implies it is not easy to obtain properties that are clearly cash flow positive at acquisition.

Good luck

Thank you for all this. My current mortgage is $2,750 at 3.15 interest rate on the 590k sfr. So my cash flow is $2,250 total. The front house that i took the loan out for rents for 3k. Back house 2k

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I purchased a single family home for 590k (20%down) in southern California and Reno cost was 50k. I added an ADU for $115k cash. It collects total 5k monthly rent. Please help with roi, cap rate or whatever you would consider the most important metrics. Thank you

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It is currently 30 year conventional

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I'm doing the same thing on a 600k property, but building it in the backyard. Main house will still have garage and rent for $3,200. 800 sq foot ADU $1,800 - $2,100. At your price point, renters may expect a garage unless it has a lot of bedrooms that the perfect family needs (5 or more).

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My new investment when complete will be a SFR with a back house collecting $5,200 a month total. About $2k profit per month. What would you do? My problem is, that being a SFR, an appraisal will not look at rental income the same way as commercial property, or a refi would be the easy answer.

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Originally posted by @Jonathan Greene:

I don't agree that turning a living room into a bedroom will get you any extra money and I definitely wouldn't try to comp it out like that. If you take away the bigger living room and add a bedroom, you decrease the value of the actual living space. If it's a smaller living room, it could add value, but is it off the kitchen or tied to that. The question is why does this house need a 4th bedroom? Is it only because you think you will get more rent? The square footage is the same and tenants can use the room as a bedroom if they wanted to anyway, but you are also increasing the potential wear + tear by adding another bedroom for added tenants.

Those are great points, and concerns that I have as well. Thank you

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Originally posted by @Jon Reed:

Run your numbers...

Figure out how much a 3/2, 4/2, and 4/3 rent for in your area
Figure out how much it will cost to convert it to a 4/2
Figure out how much it will cost to convert it to a 4/3
Figure out how much the resale value will be for a 3/2, 4/2, and 4/3

Thank you. All good advice.

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i currently have a rental that is 1,600 sq feet, 3 bed, 2 bath. I am considering adding a 4th bedroom in the place of a front living room. The front living room was a permitted addition before I purchased and is approx 300 sq feet. There is a smaller family room toward the back of the house that is original. I understand I can probably get an extra couple hundred dollars a month if I add it, but will it be worth the cost? Would the large front room possibly keep tenants there longer if left the way it is? Maybe create a master suite? It's a middle (to lower) income area in southern California.

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All Forum Posts by: Dennis Robinson

Dennis Robinson has started 3 posts and replied 8 times.

Post: Please help me calculate my cap and roi

Post: Please help me calculate my cap and roi

Post: 2k per month PROFIT on SFR. What would you do?

Post: SoCal - Buying a Property and Building an ADU - Is It Worth it?

Post: 2k per month PROFIT on SFR. What would you do?

Post: Would you add a 4th bedroom

Post: Would you add a 4th bedroom

Post: Would you add a 4th bedroom