All Forum Posts by: Jean Santiago

I agree will everyone who answered before me. IMO, Closing costs are bellow average fo the USA. You are at 1.4%. Run your numbers at least to 3%. It will avoid you huge headaches at the closing. 

Hi Jean,
Thanks for sharing your your calculator sheet. It and the comments above have been very helpful!

You said you'll have family living there? My biggest piece of advice is don't mix business and family. Family always ends up feeling entitled in one way or another, and unless you're truly comfortable with moving forward on evicting relatives (and the repercussions to the family as a whole), avoid renting to family. 
My apologies if that sounds rude, I've just seen it happen SO often. In fact, it happened to my mom. Her brother ran her house into the ground. 
I've had to say no to family, I simply said "Sorry, I don't mix business with family" and they said "Oh you're right, you're right." I'm all about boundaries though. 
Again, my apologies if that came off as rude. It's not my intention. Just something to think about. 

Yeah, @Jean Santiago, I would expect something in the 4s.

@Jean Santiago Your interest rate on your loans are going to be about .75-1 full point higher than your owner occupied mortgages, regardless of where you live in the U.S. I hope this helps!

@Jean Santiago I'm echoing what they've said: 2% vacancy is WAY low. We always use 5% at a MINIMUM. Add in insurance, property management (monthly fees plus leasing fees), and you'll need to increase that interest rate. I've been talking to a lot of lenders lately, and 3.5% for non-owner occupied is not very realistic in the current market.

As @Jaysen Medhurst said, don't get too optimistic about rent. These numbers LOOK great at first glance, but you have to make sure you really include everything, and opt to be a bit conservative to make yourself safe. I suppose if you're including utilities in their rent pricing, it makes a bit more sense, but from my experience, it's easier to find a tenant if you have a flat rent rate, then put the cost of the utilities right onto them. They might balk at $1600, but see $1450 and think that's reasonable.

Getting something truly rent-ready can sometimes only cost $500, but in a house that size, it's unlikely. Have you looked into the age of all of the mechanicals? There might be some big ticket items near the end of their useful life. Good luck! :)

@Jean Santiago, my biggest concern would be getting $1600/month rent. Most of the similar homes for rent I see in Jacksonville are in the $1200-1300/month range. I don't know a thing about Jacksonville, but be very sure about what market rent for similar SFRs in the neighborhood are.

Beyond @Tim Herman's suggestions on your analysis:

• Include a budget for initial repairs. There is always something.
• You're not including management (10-12%). Always have this in your underwriting, especially since it looks like you live on the other side of the country.
• A 3.5% loan may be optimistic for non-owner occupied.

@Jean Santiago Lots of problems. For a sfh should be no utility cost. Vacancy of 2 % is saying your tenants will stay in your property an average of 50 months, unlikely. I use 8%. The bank will not let you self insure so insurance will have to be added. Repairs are fine but no capex. My capex budget includes but not limited to: roof 25 years, floors 10 years ( unless carpet then 5 years), appliances, and hot water heater 12 years, hvac 20 years, bath and kitchen remodel 20 years, etc. Let's assume 1500 sf of flooring brand new when you buy it. Life span of 10 years. In my area it is $6 sf to replace with a moderate LVP. 1500sf*$6 sf=$9000/10 year life span/12 months in a year=$75 per month for 1 item in a capex budget. I use 10%. This will probably still cash flow with the numbers given.

@Jean Santiago I see you are very much on the same boat as me! Make sure you don and doff that PPE properly! Yes, my mother-in-law lives in Naples, Fl which is an area I was interested in since I visited there many times. However, I do notice the properties are much more expensive compared to other parts of Florida. I'm sure it's because of the high-paid clientele that live in the area, but still much cheaper than here in NJ. The property taxes here can be a real deal-breaker. Thank you for reaching out and I hope you find what you are looking for. Be safe out there!

@Caroline C. Unfortunately, Florida is probably the only market right now I'd be able to visit because I have somewhere I can stay while I look at properties. My family all live in NJ so being able to find something in another state that I can see will be challenging, but I get what you are saying. I will do my research in the meantime until this is all over. Maybe I'll get lucky on my first investment. Thank you for the advice! Stay safe!