All Forum Posts by: Ava G.

Tough road ahead as in it's not worth the effort for a measly return?

Am not sure if I can get advice as my property is in a non-US country but I guess the principles remain somewhat the same. I'll convert the amounts to dollars for easier comparison.

Few years back, I bought a condominium unit in Manila, Philippines (where I'm a local but I'm living in a different country) and it's within the central business district. 

In USD it amounts to $70,000 (unit price + closing cost + interior design & furniture).

To cut the long story short, my total cash outlay amounted to $29,922 (which is 42% of the total unit value). (The interior design + furniture was quite expensive which I had to pay in cash and after the unit was turned over. Then it was vacant for quite some time because of admin issues with the leasing department. So I had to shell out cash for the monthly amortization and assoc. fees during this vacant period).

Currently, it's been available for leasing for about 3 months after everything was settled. The leasing department told me that there were a couple of potential tenants who wanted to stay for at least a year. However, the going monthly rate for my unit is only about $336. My mistake for overestimating how much I can charge for the unit when I bought it. Anyway, this amount would give me a negative cash flow as per below:

Cash Flow: $366 (income) - $466 (expenses) = -$100

At most, I can increase it a bit to breakeven.

One solution I could think of would be to use AirBnB (short-stay) rental instead to increase my monthly income from the unit.

Roughly, let's say occupancy rate is 50%, if I can rent it for $40 / day (which is quite possible from what I see in the AirBnB listings in that area), then that's about $7,320 a year. Divide it by 12 then that's a monthly income of $610.

Cash Flow: $610 (income) - $466 (expenses) = $144

Cash on Cash would be: $1,728 / $29,922  = 5.70% 

It's not outstanding but at least, it's not negative.

Another option is just to sell it and start over (now at least, am better equipped with this experience and not make the same mistake).

Any other advice for me? I would really appreciate. Thank you.

I've bought a rental property recently, my first one, and am looking at similar units nearby for the market rate of rentals.

To be able to cash flow, I need to charge a monthly rental of about $800. However, when I did a bit of research, I noticed that bigger units rent for the same amount (say, both are even in the same location).

My question is, how do I justify renting out my unit at the same price if it's smaller? What other factors can I improve on to compensate for the unit's size?

I'm wondering if there are no money down options in the Philippines that one can follow? There aren't enough information about this on the internet (just US-based advice) and it would be great if someone has done deals in this manner, successfully?

I always hear that condos are usually not good RE investments due to loss of control and maybe high HOA fees.

But for the successful condo REI, what made you successful despite the naysayers? Also, how do you compete with other condo owners (within the building and beside the vicinity) who are also renting their units out? How do you stand-out?

Are your condo units in a very good location? Did you buy the cheapest condo unit around the area so that you can also command a lower rental fee?

I'd appreciate some advice!

I am starting with REI so pardon my stupid question.

Investing in Real Estate, for the most part, has got to do with the confidence that there is an abundant number of people who are willing to rent a place (instead of buying a house themselves).

But does it follow that if someone can afford an expensive rent, they should also be able to afford buying a house?

I do know some obvious reasons (e.g. they are not going to stay there for long)... but what would be the other reasons, especially for long-term tenants? I just like to know a bit of psychology behind it.

Or for BP members who have a lot of tenants, would you be able to share their reasons for renting?

Thanks a lot for this @J Scott! It's awesome.

Just a question. Can you give an example of Variable Cost PM & Fixed Cost PM?

Again, thanks a lot for this. I did my own excel using your Real Estate Analysis blog post and the results on my excel are very close to yours. Just wondering about those 2 variables and how they fit into the whole picture.

I've been posting here often recently and I'm a newbie who's targeting SFH (condos) as a niche market in my area.

While looking at some condos in the same good location as my target property, I'm seeing some that are priced way below the market rental value. For instance, one condo unit is about $90k-$100k but is renting at $590 / month. I've seen a few that are like this although some are not very low but still below their supposed market rate. Some are even fully furnished at that.

I'm wondering why some are doing it this way. Are they not really investors but maybe end-users who are happy enough that someone will share their monthly expenditures for that property?

If there are people doing this, bringing down the rental rate, how does one compete?

(Although, I do see some who are pricing their units normally or above the normal rate.)

Can you recommend where I can get a more accurate rental analysis sheet? So far, I've been using the Real Estate Analysis Worksheet I found here on BP. Any recommendations would help immensely.

BTW, I did include the expenses into consideration (tax, mgmt fee, vacancy, etc.).

We're eyeing a property in the Philippines (my hometown) so the actual numbers are huge (in millions) but I roughly converted the values in dollars for easier analysis. I've never purchased any property before, and if ever, this is going to be a first.

-----

Type: Single Family (Condo)

Property Price: $109,016

Down: $26,739

Mortgage: 20 years at $590 / month

NOI: $8329 (annual)

Cashflow: -$1309

Cap Rate: 5.29%

Cash on Cash: -4.98%

Total ROI: 12.79%

-----

The Cash on Cash is negative because, according to my research, the rental rate (average) in this location is just $700 / month although I've seen others renting theirs at $1200 or more (for example, in AirBNB). I need about $1100 / month to have a positive cash flow. If I'll rent it using the 1% rule, the numbers would significantly improve.

Cap Rate: 7.64%

Cash on Cash: 4.70% (still low)

Total ROI: 22.38% (2% assumed appreciation)

The great thing about this property is that, as I've mentioned in other threads, it's a location, location, location type of property. Almost perfectly positioned. It's walking distance to everything (hospital, huge malls, shopping area, international schools), it's within a rising business district (lots of companies are transferring offices here), it's beside a national park (no other building will obstruct its view), and the business district where it resides is sandwiched between two major business districts. In our country, the neighborhood is considered a bit on the high-end.

Any thoughts? Does it look like it's a disaster waiting to happen?