All Forum Posts by: Jean-Claude Governale

Thanks JD, other than looking to get firmer numbers for my analysis, do i really seem to be missing anything in my list??

Thank you for those that have responsed, but I am still looking for some answers to some questions:

What Monthly Expenses are people using/factoring in to their analysis of rents??

I like to see if there are other things i am missing, I currently have:

Mortgage

Taxes

Insurance

Landscaping

Utilities (if applicable)

Vacancy, Repairs, Capex
HOA (if applicable)
**Property Mgnt** I havent been factoring in, due to me being new, and looking at aquairing my first rental, I would like to attempt to manage myself, but I am also trying to find something that would cashflow 200 or more per month so anything higher than 200 could be used towards PM if need be.

What else am I missing in looking at potential deals?

Benjamin,

Im actually glad you brought that up about the CapRate, I have read several different things about Cap Rate and calculating it,  and honestly it was somewhat confusing, so my "METHOD" may be incorrect.  

What I did was i took- (NOT house hacking)
Purchase Price- 185k

Yearly Gross rent 3300*12 = 39600 (not house hacking)

Yearly Gross Expense (Not including Mortgage) 1103.00*12= 13236

Net Gross Gross rent - Gross Expense - 26364

Finally Net Gross Divided by Purchase price 14.2%

Thanks JD, as i mentioned, i estimated a lot of the numbers, I'm not sure how i would get a firmer Insurance number unless i called companies to get actual rates.
And yes you are correct on the gross monthly rent providing I house hacked, which is something I am considering, but not 100% committed to yet, depending on the property.

But I guess that at point where the sold numbers are, meaning if this deal was still possible, and lets say i ran the numbers at 185k, and based on my estimates, i saw a possible 1300 a month cash flow. I guess that is when i would begin to dive deeper into finding harder numbers??  Is that how people are analyzing their deals?

Again, I am brand spanking new to this, and just looking for some education, feed back or even someone local i can learn from and bounce ideas off of....

Also, what are some of the monthly costs people are including for their rentals that I might be missing?

Hello everyone, and first let me thank those of you who took the time to read and reply to this post.

I am new to investing and I have been lurking on this forum since April I think? I have been reading posts, articles and listening to pod casts, also while trying to analyze possible investments. Back in April I committed myself to try to analyze 100 deals in 30 days, while I didn't get to 100 I did get quite a bit done. The months passed and I was and still am in analysis paralysis, I realize I am stuck due to fear of getting in over my head, fear of not knowing something, as well as financial fear..

But anyway, the deals I analyzed months ago I went back and looked at one yesterday and what I thought was a good deal then sold for less then what I analyzed it at and that sparked this post.

I feel like I am missing information when looking at a deal, so I was wondering what else I should look at, I know that as a deal becomes more and more attractive, there is probably more you need to look into, for sake of not being too general, ill list this one deal I am referring to:

Deal:

4 Plex

List Price was 230k

4 units rented for 825.0/month

Gross Rent 3,300.00 per month

What I was looking at as expenses:

Mortgage - I was considering house hacking, FHA loan with 3% down and 4.5% interest rate- 1302.00/ month

Landscaping- 80.00 per month

Water/sewer/ Utils- Not sure, in Fl most rentals handle their own Utils

Taxes- estimate of 312.00/month

Insurance-estimate of 100.00 per month

Vacancy/Repairs/CapEx- 16% of Rent- 528.00 per month

Not sure what else I am missing. But based on these numbers alone, again, which aren't exact and I'm sure would be higher. But based on these numbers alone, I show this property would cash flow at 787.00 per month.

Here is what really got me, when I checked on this property yesterday, I saw that it sold for 185k

So all my numbers are now:

4 units rented for 825.0/month

Gross Rent 3,300.00 per month

What I was looking at as expenses:

Mortgage - I was considering house hacking, FHA loan with 3% down and 4.5% interest rate- 900.00/ month

Landscaping- 100.00 per month (I even bumped this up to 100/month)

Water/sewer/ Utils- Not sure, in Fl most rentals handle their own Utils

Taxes- estimate of 1.25% of purchase price is 2313/yr or 192.00/month

Insurance-estimate of 100.00 per month

Vacancy/Repairs/CapEx- 16% of Rent- 528.00 per month

With these new numbers, I show the property cash flowing at roughly 1297.00 per month.

And if I did the cap rate correctly, it was 11% and now shows 14%...

My questions are:

What am I missing?

Am I off to a good start in first analyzing deals, what more do I need to look at if I want to seriously consider a property?

Could the Difference in price, 45k less than initial listing be due to something wrong found with the property? Or how did someone really get the property for 45k less than what it was listed at??

I know I am very new to this so I am just looking for some guidance in what things I also need to consider in looking at properties, costs, expenses etc.

Again, thank you for taking the time to read this, and I appreciate all feedback.

JC

Chris, that does help, thank you.  So with what you said in mind, how does a new investor find what the avg caprate for my market is??  I am also sure that is ever changing, i.e. as properties increase in value, sometimes faster in hotter markets, but how do you find that number?  I'm sure if I spoke to 50 different investors in my local market, I would get a dozen different Avg Cap Rates..  All depending on when they bought, the deal they made, or how low they bought....

Jaysen, thank you very much for the reply, that does help.

As a newer investor, I was looking at a triplex in my area, in initial number crunching, it appears it would cash flow nicely and in a good neighborhood.  But as mentioned the CapRate is low.

Obviously being a brand new investor, I want to invest wisely, and avoid any new investor mistakes.

Thank you, other replies are also very welcomed and appreciated.

Good Morning BP community, first let me say that I have been following the forums, pod casts, blogs and everything on here for about a month now, and I love this community, so much amazing information.

I am a new investor in Florida, and I have been looking at rentals.I've read about cap rate and I believe I understand the formula for calculating it, but I still have some questions about how valuable it really is and if cash flow is more important?

I was wondering why cap rate is calculated on the value of the property, not actual income invested into the property?I would think that the rate of return on capital invested is more important than the rate of return on the value of the investment.Now I understand if you do not finance the property, pay off and have no mortgage, then yes, I can see how that can be very useful.But from what I have heard and read, it seems a lot of people do finance their investment properties so how big of a role should cap rate be when financing a property for long term rental?

I've read people talking about 10,12,15% cap rates on rental properties.But wouldn't cash flow be more important. Say for example you have property that is generating btwn 400-500 cash flow but the cap rate is 2%, wouldn't that still be a good investment property for a buy and hold?

Thank you for taking a moment to read this.

My mother lives in a 55+ community just south of Tampa, and the seasonal snow birds do rent condo's like hers during the winter months. From what she says, they will pay top dollar, to where the owners will usually fund their taxes/insurance and HOA fees for the year in just a few months.

The market is there, down side of the 55+ communities are they have much higher HOA fees than normal condo/townhomes... This is in part due to the additional amenities provided to the retirement community. I believe my mothers HOA dues are just over 400 a month. But her community has 4 club houses, indoor and outdoor pools, shuffle board courts, tennis courts and a lot of other things going on in that community.

So that would be the biggest thing you would need to look at, is if the cash flow is there during the seasonal months...  

Just my .02 being a new investor.  I hope this helps.

John and Ned, thank you for the replies, and advice I appreciate it.