All Forum Posts by: Jeff Barnard

@Kayla Boyer on the surface I think this is a fine idea. As others have said, run the numbers with all of the expenses considered. If the results meet your minimum criteria, then go for it. Try using the BiggerPockets Rental Property calculator. As a BP member, you can use this for free (up to a certain limit). Going through this exercise will ensure you've factored in all potential expenses. Just because the house is renovated and in solid condition, still put in 10-15% total for Repairs/Maintenance + CapEx. Leaving this out of a calculation is sure to come back to bite you in the form of unexpected expenses. Lastly, when you do select a tenant and set up your lease, make sure you are compliant with NH state laws. For example, in NH there are limitations on what you can collect up front in terms of Security Deposit, First/Last Month, etc.

Best of luck!

Hi @Tucker LaClair,

As a PRO member, you have access to state-specific Landlord forms here on BP. On the Pro Perks page you will find a tab called "Landlord Forms." Here you can download NH-specific forms including a Lease Agreement. This is where I started for my first lease, and I have adapted the form a few times to meet my specific needs. However, I will echo @Jessica Stevenson and recommend you speak with an attorney early in the process. A few bucks spent on the front end may save you from a world of trouble down the road. 

Best of luck getting started!

Hi @Lori Gagne - congratulations on the purchase. Is this a 3-family? What do you anticipate for monthly cashflow? Will you be making updates to the property or you just wanted to start with a vacant building to fill with tenants you can screen yourselves? I am a beginner with just one 3-family in Manchester so I am always looking to learn more from other local investors!

Great question @Mindy Jensen! While I am a relative newbie, I am a nerd and a numbers guy and this is a topic that always catches my attention. 

When I analyze my  rental properties (using the BiggerPockets Rental Property Calculator, obviously) I approach it much like @Scott Trench. I will add in $10K of additional rehab dollars to fund a CapEx/Repairs account. I will run my numbers with and without this allocation, but including this will result in the most conservative approach. I will then add 15% of monthly rent into this account. If I don't end up needing the initial $10K, all the better. Of course, with my first property, I needed a hot water tank within the first 4 months and I had the funds set aside to cover this with no issue.

The part of this discussion that frustrates me is how many investors throw a % number blindly at things like CapEx, Repairs, Vacancy, etc. To get an accurate sense of the numbers, there needs to be a little more thought. 15% of the total rent I receive for my triplex in New Hampshire is very different than 15% of the rent for a triplex in Boston, or Wyoming, or Colorado. However, a hot water heater costs what a hot water heater costs. Sure repair costs will vary some based on location, but these rule of thumb percentages do not apply evenly across the board. My 15% may be enough to cover repairs and CapEx, but it may not be enough for someone else. For a quick view of a property, I aim to be conservative. 15% total for CapEx/Repairs, 8.5% for vacancy (1 month vacant). If the numbers work out using these assumptions, I can move forward with a relative amount of confidence.

I am looking forward to reading the other posts on this thread... 

@Adrian Luna this must be for a condo, given the HOA fees and very low CapEx? The vacancy rate looks a bit low to me, but I am not familiar with your area. I am mostly curious what repairs your plan on doing in $10K that result in a $50K increase in property value? Does $35/month in cash flow and a 1.16% COC ROI meet your minimum criteria? That does not meet my criteria but we all have different goals and objectives. Best of luck!

@Joshua Ryan Meador I would be curious to see what the numbers look like if you run more conservative. For instance, it looks like you have 3% vacancy. I run my numbers with at least 5% but usually 8 or 10%. You have 3% Repairs and 2% CapEx - these are both way too low. I recommend Repairs + CapEx = 15% total. Whether you go 5%/10% or 7.5%/7.5%, this will give you a much more realistic estimate. 2% management seems very low to me, although I self-manage so I don't have any actuals to base my statement on. Others usually recommend 8-10% here. PMI seems low, but again I am used to houses that cost much more. For my triplex, PMI is closer to $120/mo.

Are you planning to owner-occupy the building? I will assume the answer is yes since you are using a 3.5% down payment. Is the total rent number once you move out of the building?

Even if you disagree with my recommendations, run the numbers that way and see what you get. Then you will have a conservative view and a more optimistic view. Best of luck!

@Joe Pearson your desired entry point sounds similar to mine. I started by buying a 3-family in Manchester and living in one of the units. I was not cash-flowing positive on Day 1, but my monthly expenses were drastically less than if I were to rent elsewhere. However, I did have a "major" expense (~$3500) in my 3rd month owning the building, despite a thorough home inspection during the purchasing phase. Luckily I had plenty of cash saved up to deal with this, but if you are depleting your reserves and don't have the means to take care of unexpected issues you are asking for trouble. The "reserves" you have should be for real estate-related expenses (meaning you should also have your emergency fund for your personal life stored away separately).  

I don't know what your current living situation is, but it sounds like you should focus on reducing expenses and increasing your savings. If you can focus hard on building up some extra cash, you may notice more options open up to you. If real estate is truly a goal, then cut the cable bill, get rid of the car payment, reduce the frequency of eating out, etc. and get than bank account built up (I am not accusing you of doing any of these things, just generic comments). 

Have you read "Set for Life" by Scott Trench? The process he walks the reader through seems directly applicable to your situation. Reduce expenses, increase income, build up savings, deploy dollars into money-making assets. 

@Aidan Mulligan Somewhere in between "legit" and "far from realistic." How do you plan on financing the property? If this is not going to be owner-occupied, you will need 20-25% down. If you plan to live in the building and house-hack, then a 5% down payment is realistic. Typically I run the numbers with a total of 15% between CapEx and Repairs/Maintenance. You only have 5% for Repairs/Maintenance and 5% "misc." Is "misc" intended to represent CapEx (new roof, hot water heater, furnace, etc.)? I like that you included Property Management even though you intend to self-manage. This will give you a more conservative view of the numbers and a plan towards being more passive should you choose. What about utilities? Do the tenants pay all utilities including heat, hot water, water/sewer, electricity? Do you have any landscaping/lawn care to consider? Perhaps this is included in the Property Management?

In the end, you need to determine what your minimum criteria look like. Is ~$50/door per month acceptable to you? What Cash on Cash return are you looking for? Will this be the best use of the money you have ready to deploy? 

Best of luck!

@Joshua Ryan Meador I would recommend using the Rental Property Calculator to run the numbers assuming you are not living in the duplex. Do the numbers work? Do they meet your minimum criteria? If so, no big deal if you need to pay a few hundred bucks a month to live there. Where else can you rent for that cheap AND have complete control over your living space. If the numbers don't work with both units rented, then your ability to exit (by renting out the 2nd unit once you move out) goes away. Keep the end in mind...

Run the calculation and post it here for others to review. Best of luck...

@Tom Kentop Jr The numbers look pretty solid to me. Do they meet your minimum criteria? I usually look for CapEx + Repairs to total 15% compared to the 12% you show. This would add a little more conservatism to the numbers.

Out of curiosity, how big are the units? Where are you located? These numbers (both purchase price and rent amounts) are much different than what I see in NH.