All Forum Posts by: David Johansen

I am so glad I found Bigger Pockets!!! I have been reading and researching the site and many of your blogs as much as I can as I did not want to ask the same questions you have already answered a million times:) 

First off I wanted send thanks @Ali Boone as her article "Rental Property Numbers so Easy You Can Calculate Them on a Napkin" was invaluable to me! (I could not get the @ thing to highlight Ali so I will come in to add that to this thread.) I have used this article to run the numbers on my first investment property that I am currently living in and am preparing to rent. Please let me know if I made any erroneous assumptions or made any outright blunders:)

The home I purchased has 4 bedrooms and 2500 square feet(it had gone through foreclosure) on approximately .22 acres.

Purchase Price - $124,000

Cash to Close - $4,340 (3.5%)

Monthly Projected Rent - $1,350 to $1,450 (Figures obtained from a PM yesterday)

I am using $1,350 for these calculations so: 

Yearly Gross Rent $16,200

Yearly Property Taxes - $1,730.61 (do property taxes change when going from residential to being a rental?)

Yearly Home Owners Insurance - $726.18 (I assume this will increase when switching to a landlord policy)

Yearly HOA Fee - $350

Yearly Mortgage Insurance - $1,451.76 (I will be able to get this dropped in approx 3 yrs)

Yearly Vacancy - $1,620

Yearly Property Management -$1,620

Yearly Repairs- $810 (It is an A/B property in a good neighborhood with minimal immediate repairs so I used 5%. But I will be saving all excess cash for repairs until that account has $5,000 in it. I also can borrow from my 401K if an emergency comes up.)

Yearly Mortgage - $6,358.58

The PM charges 50% of the monthly rent each time he needs to fill a vacancy as well so should I add that in and just assume on paying this once a year even though hopefully that will not be the case? Currently I don't have this in my calculations.

So the Net (not including the mortgage) is - $7,891.45

The Net including the mortgage is - $1,532.87

So I come up with a CAP Rate of 6.36%

Cash on Cash Return of 35.31%

Now if I don't include the mortgage insurance as it will go away in 3 years I get:

NET not including mortgage - $9,343.21

NET including mortgage - $2,984.63

CAP Rate - 7.53%

Cash on Cash Return - 68.77%

From my reading these returns are lower than many of the recomendations. 

Did I do ok? 

Should I be using the low end of the rent range for these projections as I did or do you use the middle, etc? Obviously the returns would be better if I used higher rent figures...

Are there any considerations that I should be including but did not?

Thank you in advance for taking the time to look at this and help a newbie on his journey!

Thank you all for the welcome!!! 

@Elizabeth Colegrove  I have started watching pod casts and have read the free BP books. I especially loved the one about what REIs would do differently if they were just starting and knew what they know now. That is very interesting that you self manage properties from out of state! That would be a challenging issue to work through. I am more than a little bit curious how you work that and will definitely be checking out your blog!!

@Ursula B.  Thank you for the welcome!!! I am happy to see that there are quite a few members of BP in the area!! I look forward to connecting with you both:)

 @Elsa Woods Thank you very much for the welcome and the hint on rotating the picture:) Congratulations on your Broker license! 

@James Wise Thank you very much for the welcome!!

Also, I have one question from the get go. I could not figure out for the life of me how to turn my profile picture right side up. Please advise if you do know how I could do this. Thanks!

I happily stumbled onto this site while doing research on real estate investing a few weeks ago. I have been very impressed with the friendly spirit of cooperation in this community and am honored to be allowed to be a part of BP! I have studied investing (primarily stock market) for much of my life but have in the past not done a good job getting a base below me so I can really apply that knowledge in earnest. 5 years ago just after remodeling a home with stone walls built in 1900 with a naive understanding of what the costs and time inputs would be, the housing crash happening right in the middle of this, persevering and turning it into a beautiful home.....Then I was laid off. I became a motivated seller and was able to sell it without going through foreclosure but I lost all of the equity and savings I had built over the previous 15 years. That was huge wake up call for me. I resolved to do things the "right" way this time and to be very deliberate with money choices. I have a long long way to go but in the past 5 years I have come a long way. For a few years my wife, 4 wonderful children, and I rented an apartment. Almost 2 years ago we were able to buy a home that had gone through foreclosure at a great price. I bought a home that would be a home we would love to live in but at a price that we could rent it out profitably and finally start being a real estate investor. We are now preparing to either buy another home and rent this one out (I think this is the most feasible or stay here and buy another rental property. I am excited to get to meet you all and thank you in advance for your help and camaraderie:) I have a lot of mortgage industry and customer service experience and hopefully I will have some things I can add to help others as well. So with all of that said, Hello BP community!!!

I happily stumbled onto this site while doing research on real estate investing a few weeks ago. I have been very impressed with the friendly spirit of cooperation in this community and am honored to be allowed to be a part of BP! I have studied investing (primarily stock market) for much of my life but have in the past not done a good job getting a base below me so I can really apply that knowledge in earnest. 5 years ago just after remodeling a home with stone walls built in 1900 with a naive understanding of what the costs and time inputs would be, the housing crash happening right in the middle of this, persevering and turning it into a beautiful home.....Then I was laid off. I became a motivated seller and was able to sell it without going through foreclosure but I lost all of the equity and savings I had built over the previous 15 years. That was huge wake up call for me. I resolved to do things the "right" way this time and to be very deliberate with money choices. I have a long long way to go but in the past 5 years I have come a long way. For a few years my wife, 4 wonderful children, and I rented an apartment. Almost 2 years ago we were able to buy a home that had gone through foreclosure at a great price. I bought a home that would be a home we would love to live in but at a price that we could rent it out profitably and finally start being a real estate investor. We are now preparing to either buy another home and rent this one out (I think this is the most feasible or stay here and buy another rental property. I am excited to get to meet you all and thank you in advance for your help and camaraderie:) I have a lot of mortgage industry and customer service experience and hopefully I will have some things I can add to help others as well. So with all of that said, Hello BP community!!!