All Forum Posts by: Eviano I.

Given the fact that it's a "turnkey" property, have you been able to speak to or vet the property manager at all? That's a key consideration (particularly on South Jackson). I struggled to find a quality property management firm willing to operate in South Jackson when I was searching for options last year.

Awesome. Thanks gents.

@Tim Herman thanks for your response! I think I see your point re investment transaction fees vs opportunity cost of every dollar that leaves your account. I'll definitely run a scenario or 2 on the BP calculators to see the approach they take. Out of curiosity, do you include closing costs in your cash-on-cash calculations?

Hi BP Community,

I'm relatively new and I have a (what I believe should be) basic question: In calculating returns, should one include closing costs as cost basis when estimating cash-on-cash return and why / why not? This is solely for analyzing and comparing different properties, not for tax purposes or anything else.

Illustrative Example

Purchase price - $100k

Closing costs - $5k

Down payment @ 20% down - $20k

Down payment + closing costs - $25k

Annual cash flow - $3k

Cash-on-cash returns (w/o closing costs) - 15.0% [= 3 / 20]

Cash-on-cash returns (w/ closing costs) - 12.0% [= 3 / 25]

I have been including closing costs, because that's the cash out of my pocket on day 1 and also because it's a meaningful amount of the initial cash outlay (e.g. 5/25 = 20% in this example). But if I turn around and try to sell the property 1 day later, the property doesn't automatically appreciate by the $5k amount of the closing costs. That being said, if I think about looking at the cap rate (NOI / purchase price) instead of the cash-on-cash rate ([NOI - debt servicing costs] / cash invested), then I do feel like one should not include the closing costs to the purchase price in denominator of the cap rate calculation; which is the opposite of what I do with my cash-on-cash calculation. My main issue is that the closing costs is such a big amount vs the down payment (for properties I'm looking at), so I don't want to inflate my returns by not including them.

Please let me know if I'm over-complicating this, but I welcome all views. (Btw, I know the best solve for this is to find a rockstar deal, so this will just be a rounding error; but I'm a numbers guy, so please humor me).

Thanks in advance!

Welcome to BP! I also invest in Central MS.

Agreed re Mississippi. My understand is that in certain counties you can evict within 3-4 weeks for single family rentals. You'd need to research the difference between SFRs and mobile homes to Jay's point.

Thanks @Darron Stewart. That's one way to do if, particularly if you have the time. Also, depending on how much of one's net worth is tied up in real estate, it could be worth making the time even if you're crunched. Cheers.

Hi all,

Ahead of tax season, do people have any highly-recommended CPAs / tax preparers in the Central Mississippi area that's familiar and up-to-date on real estate investing rules and tricks of the trade? If they also do real estate investing personally, that's an added bonus (further alignment). Any recommendations would be much appreciated.

Thanks in advance.

Thanks Christian. If you don't mind my asking a very basic question, are there many properties on the coast that aren't in flood zones? I grew up in Jackson and was there during Katrina, so I just assumed that every property on the coast would be in a flood zone given climate patterns these days. (Again, I know I'm being overly simplistic and generalizing, which is always dangerous). If so, do you increase your maintenance / rehab estimate when you analysis properties for the inevitable storms that will come periodically? Any experienced insight for a rookie would be much appreciated.

@Antoine Martel based on the markets you know well, what markets would you recommend are cash flowing well now? I've been looking closely at Central MS for the past few months, and I agree based on my criteria (i.e. healthy cash flow in good school districts sub-$150k), it hasn't been as straightforward as I expected.