All Forum Posts by: Jonathan Warner
Jonathan Warner has started 11 posts and replied 50 times.
Post: Look for a more advanced way to estimate CapEx
- Posts 52
- Votes 24
Hi all. I've been fudging around with a few different ways to properly estimate CapEx in my proforma. I don't suppose you guys have a tried and true method of doing this do you?
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Mendy M.:
Quote from @Jonathan Warner:
Quote from @Marcus Auerbach:
Quote from @Jonathan Warner:
Quote from @Marcus Auerbach:
Quote from @Jonathan Warner:
Hello. I'm a newbie investor with minimal experience analyzing deals.
My agent sent me this one off-market deal yesterday and sort of got me fired up about its potential. However, I underwrote it quite conservatively and it has around -150 a month in cash flow.
Could you guys please take a look at how I underwrote it and tell me if you think I did everything properly?
1. The purchase price is around $210,000. It's a 1,000 sq ft 2BR/1Bath that has about 700 sq ft in basement space that could be converted into an extra bedroom and bathroom. I put in a conservative estimate of $50,000 for the rehab. It's ARV, based on similar comps in the area (I did this myself on ChatGPT), would be around $330,000-$340,000. I set it at $335,000.
2. A conservative estimate for the annual maintenance and repairs would be around $2,500 and annual CapEx comes out to around $1,117
- I used ChatGPT to help me with this part. It took into account the new roof and HVAC and gave me a 30-year budget estimate and annualized the costs.
-
| Expense Item | Schedule | Cost per Event | Total 30‑Yr Cost |
|---|---|---|---|
| Roof Replacement | Year 30 | ~$11,000 | 11,000 |
| HVAC Unit Replacement | Year 15 | ~$7,500 | 7,500 |
| Water Heater Replacements (2 cycles) | Years 10 & 20 | ~$2,000 ×2 | 4,000 |
| Flooring/Interior Cycle (2×) | Years 15 & 30 | ~$3,000 ×2 | 6,000 |
| Major Systems Update | Year 20 | ~$5,000 | 5,000 |
| Routine Annual Repairs & Maintenance | Every Year (30 yrs) | ~$2,500 × 30 | 75,000 |
| Total Over 30 Years | $108,500 |
Property taxes would be $490
Insurance would be $2,100
Property management would be 10% of rent which is conservatively estimated at $1,900 post-rehab, so $190 per month and $2,280 annualized
I'd likely pay around $25 a month for garbage, so $300 annualized
I assumed a new tenant every 3 years since it will likely be a family rental, so I estimated $63 a month leasing fee budget.
Improvements would run me around $40,000-$50,000 so I put it in as a $50,000 budget
I assumed a 20% down payment on the purchase price at a 6.85% interest rate.
Overall, it came out at around -$110 in cashflow. Despite it's negative cash flow, considering the rehab budget and ARV, I am still considering other ptions for the property. However, even if I were to flip it, I'd prefer the have a good exit strategy should I be stuck with the property for whatever reason. If things went sideways and I was stuck with the property, I'd be down $110 a month just hold onto it.
Any help would be greatly appreciated!
It looks like a deal mostly because of the lower price. And the price is lower, because it's a tiny house. You are correct, you are short a bedroom and a bathroom to be a family home. Adding them in the basement does only partially count. Both the market and an appraisla will not give you full value.
Financially, the issue is that most of your expenses come from things you have 1 count, regardless of home size: HVAC, water heater, plumbing, electrical, appliances, kitchen, chimney, driveway etc
Income is a function of the square footage and bedroom count and you are very low on both. Fixing up a house that has almost twice the square footage and 3 good size bedrooms will cost you almost the same. But rents will be much higher. So, the house will always have a poor income to expense ratio.
Our minimum is 1,200 sqft, 3 bed and 1.5 bath. We do finish the basment as a rec room for kids have a place to go & play during Wisconsin winter, which does not give us higher rent, but tenants stay significanlty longer.
When you start out, you think cash flow is the most important thing. After a few years you start to realize that buying a desireable home in a good location is long term more important than year 1 cash flow!
Your comment about the income to expense ratio is valid. It's something I haven't deeply considered. I may have to increase my buy box into the uncomfort zone to improve that mertic. The problem is it's my first deal and I wanted to come in a lower price point given my inexperience.
I wouldn;t consider myself a "Cashflow investor" however, again given that it's my first deal, I'd like a little cashflow padding for security in case any unexpected expenses arise. Thoughts?
I felt the same way (and did the same thing) when I bought my first property in 2009. Depends on your income: will a couple of hundred dollars make a difference in your life?
In 10 years from now, your initial cashflow will not matter, the quality and location of the property will matter
To be honest, no it wouldn't. Maybe it's a pride thing knowing that I "won" and found a good deal to be honest. I just don't want to lose money at all. I just got burned as a financial equity partner in a small business. I hate losing money...
I personally would be wary of buying a property that is not projected to cashflow from the start. The future and especially the near future is hard to accurately predict .
There can be lots of hiccups and expenses especially when starting out - things that need to be fixed, vacancy before you find a tenant, more things needed to get fixed when a tenant moves in, 1st months rent going to the property manager… during those times you’ll be bleeding out significant amounts of money.
Unless you have deep pockets, you may not be able or willing to continue to bleed losses for (potentially) years straight.
Yeah that's my understanding. How much cash flow would consider a good minimum?
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Marcus Auerbach:
Quote from @Jonathan Warner:
Quote from @Marcus Auerbach:
Quote from @Jonathan Warner:
Hello. I'm a newbie investor with minimal experience analyzing deals.
My agent sent me this one off-market deal yesterday and sort of got me fired up about its potential. However, I underwrote it quite conservatively and it has around -150 a month in cash flow.
Could you guys please take a look at how I underwrote it and tell me if you think I did everything properly?
1. The purchase price is around $210,000. It's a 1,000 sq ft 2BR/1Bath that has about 700 sq ft in basement space that could be converted into an extra bedroom and bathroom. I put in a conservative estimate of $50,000 for the rehab. It's ARV, based on similar comps in the area (I did this myself on ChatGPT), would be around $330,000-$340,000. I set it at $335,000.
2. A conservative estimate for the annual maintenance and repairs would be around $2,500 and annual CapEx comes out to around $1,117
- I used ChatGPT to help me with this part. It took into account the new roof and HVAC and gave me a 30-year budget estimate and annualized the costs.
-
| Expense Item | Schedule | Cost per Event | Total 30‑Yr Cost |
|---|---|---|---|
| Roof Replacement | Year 30 | ~$11,000 | 11,000 |
| HVAC Unit Replacement | Year 15 | ~$7,500 | 7,500 |
| Water Heater Replacements (2 cycles) | Years 10 & 20 | ~$2,000 ×2 | 4,000 |
| Flooring/Interior Cycle (2×) | Years 15 & 30 | ~$3,000 ×2 | 6,000 |
| Major Systems Update | Year 20 | ~$5,000 | 5,000 |
| Routine Annual Repairs & Maintenance | Every Year (30 yrs) | ~$2,500 × 30 | 75,000 |
| Total Over 30 Years | $108,500 |
Property taxes would be $490
Insurance would be $2,100
Property management would be 10% of rent which is conservatively estimated at $1,900 post-rehab, so $190 per month and $2,280 annualized
I'd likely pay around $25 a month for garbage, so $300 annualized
I assumed a new tenant every 3 years since it will likely be a family rental, so I estimated $63 a month leasing fee budget.
Improvements would run me around $40,000-$50,000 so I put it in as a $50,000 budget
I assumed a 20% down payment on the purchase price at a 6.85% interest rate.
Overall, it came out at around -$110 in cashflow. Despite it's negative cash flow, considering the rehab budget and ARV, I am still considering other ptions for the property. However, even if I were to flip it, I'd prefer the have a good exit strategy should I be stuck with the property for whatever reason. If things went sideways and I was stuck with the property, I'd be down $110 a month just hold onto it.
Any help would be greatly appreciated!
It looks like a deal mostly because of the lower price. And the price is lower, because it's a tiny house. You are correct, you are short a bedroom and a bathroom to be a family home. Adding them in the basement does only partially count. Both the market and an appraisla will not give you full value.
Financially, the issue is that most of your expenses come from things you have 1 count, regardless of home size: HVAC, water heater, plumbing, electrical, appliances, kitchen, chimney, driveway etc
Income is a function of the square footage and bedroom count and you are very low on both. Fixing up a house that has almost twice the square footage and 3 good size bedrooms will cost you almost the same. But rents will be much higher. So, the house will always have a poor income to expense ratio.
Our minimum is 1,200 sqft, 3 bed and 1.5 bath. We do finish the basment as a rec room for kids have a place to go & play during Wisconsin winter, which does not give us higher rent, but tenants stay significanlty longer.
When you start out, you think cash flow is the most important thing. After a few years you start to realize that buying a desireable home in a good location is long term more important than year 1 cash flow!
Your comment about the income to expense ratio is valid. It's something I haven't deeply considered. I may have to increase my buy box into the uncomfort zone to improve that mertic. The problem is it's my first deal and I wanted to come in a lower price point given my inexperience.
I wouldn;t consider myself a "Cashflow investor" however, again given that it's my first deal, I'd like a little cashflow padding for security in case any unexpected expenses arise. Thoughts?
I felt the same way (and did the same thing) when I bought my first property in 2009. Depends on your income: will a couple of hundred dollars make a difference in your life?
In 10 years from now, your initial cashflow will not matter, the quality and location of the property will matter
To be honest, no it wouldn't. Maybe it's a pride thing knowing that I "won" and found a good deal to be honest. I just don't want to lose money at all. I just got burned as a financial equity partner in a small business. I hate losing money...
Post: Seems to me Biggerpockets Dealfinder is useless
- Posts 52
- Votes 24
Quote from @Jay Hinrichs:
Quote from @Jonathan Warner:
Quote from @Jay Hinrichs:
Quote from @Jonathan Warner:
Quote from @Jay Hinrichs:
Quote from @Jonathan Warner:
Quote from @Jay Hinrichs:
Quote from @Nicholas L.:
i haven't looked at the Dealfinder, so I am not familiar with it and can't comment on it.
but, it sounds like you're not missing anything. most deals right now will not cash flow, and new investors tend not to be conservative enough.
in general, only the higher risk / more creative niches are going to cash flow right now. vanilla LTRs don't. now, to be clear, that doesn't mean they're not a good long term investment. they are- there are other benefits to RE than just cash flow.
i'm under contract right now on a property i plan to BRRRR, and... it's not going to cash flow when i'm done, it's going to break even. but that's just fine with me.
I think for today's market one has to define IT WONT CASH FLOW .. what does that mean?
IE no positive cash flow with MINIMUM down maximum leverage.. Is that why ?
Most everything cash flows when you pay CASH.. So think you have to start there and work backwards.. If the goal is to have NET NET NET operating income on a rental. One needs to work the numbers back from paying cash to how much down will create the amount of NET NET NET one is trying to achieve. Now I get it in markets that have very slow to meager appreciation there is little reason to buy rentals if you cant get some cash flow with high leverage but in other markets cash flow really is not the main concern the main concern is just getting in the game and how much can you afford to feed it with the capital you have to put down.
Personally I think it is about 30 seconds to underwrite SFR.. take gross rents use 50% for operating expenses then deduct mortgage payments and see where you land.. if its close look at it harder if you miss by a mile then move to the next. Going to have to look at a lot of deals on deal finder to find anything that works same with wholesalers MLS etc etc.
Bottom line is investors from 2010 till the rates jumped a few years ago were spoilt rotten with being able to cash flow with Max Leverage that is not how it was before the GFC and it is not returning anytime soon.. at least IMHO your mileage may vary. So bottom line today you may need 30 to 40% cash down to cash flow positive as that is the reality of the market and the mortgage market.
I'm more referring to the irresponsibility of the DealFinder calling a deal "cashflowing" when it doesn't factor for property taxes, CapEx, or maintenance. But, do you think it's unresonable to search for a (not heavily) cashflowing deal now with a 20% down payment? What if I was in no burning hurry and had the time and financial security to wait for a great deal? Searching off market, with an agent etc. I really only need a little cashflow for securuity and padding.
well were is the deal finder ? I dont think I have looked at it just classified.. I would never use any kind of calculator for sfr .. that to me is simply napkin math.. since NO rental ever follows a spread sheet .. something is always going to cause the spreadsheet to be inaccurate over time.
What's your napkin math? To me (a newbie) it just seems kind of scary to based such a large financial decision on a napkin xD Not saying big things can't be done on napkins, I'm pretty sure Lincoln wrote the Gettysburg Adress on one.
Search for "biggerpockets deal finder" It's a free tool that scours on market deals. It's a great concept but I just see big line items missing from the analyses.
I explained napkin math above.. but to me its very simple for a vanilla SFR rental.
GROSS rent divided by 2 = gross cash flow - mortgage payment = cash flow + or - simple as that .. If you do better great and if on the napkin it is really negative then probably a pass. But if it works then next step.. 50% over time is usually about right many try to use 30 to 40% but find them selves in trouble when as @Nicholas L.pointed out when you have a bad tenant turn over or a cap ex early on in the ownership.. like HVAC Roof foundtation etc etc.
And what exactly do you mean by this part?:
"50% over time is usually about right many try to use 30 to 40% but find them selves in trouble when as @Nicholas L.pointed out when you have a bad tenant turn over or a cap ex early on in the ownership.. like HVAC Roof foundtation etc etc." What is the percentage referring to?
Appreciate the responses.
sorry fast typing MANY will use 30 to 40% for expenses .. but that is hope not reality based on most who have experience.. I have owned 100s of SFRs Sold them all.. so that is my experience.
at least in the low B C asset class with 60 year old homes etc.. New builds or Properties in say Vegas with super low prop tax's and desert environment will be less.. but mid west upper mid west with snow grass that grows like crazy old housing stock.. cost are more.
I personally have zero interest in rentals at this stage of my career.. I prefer to rent my cash out to others to help them build their portfolios.. We do have some small commercial and solid B class MF west coast which performs.. but even those we run numbers at 40 to 42%
That makes sense. I amazed that you've gotten by on such simple napkin math. I'll consider that in the future. Personally, I still prefer to run the numbers in a more detailed manner due to my inexperience. Maybe in the future and I can a napkin math savante like you xD
Post: Seems to me Biggerpockets Dealfinder is useless
- Posts 52
- Votes 24
Quote from @Jay Hinrichs:
Quote from @Jonathan Warner:
Quote from @Jay Hinrichs:
Quote from @Jonathan Warner:
Quote from @Jay Hinrichs:
Quote from @Nicholas L.:
i haven't looked at the Dealfinder, so I am not familiar with it and can't comment on it.
but, it sounds like you're not missing anything. most deals right now will not cash flow, and new investors tend not to be conservative enough.
in general, only the higher risk / more creative niches are going to cash flow right now. vanilla LTRs don't. now, to be clear, that doesn't mean they're not a good long term investment. they are- there are other benefits to RE than just cash flow.
i'm under contract right now on a property i plan to BRRRR, and... it's not going to cash flow when i'm done, it's going to break even. but that's just fine with me.
I think for today's market one has to define IT WONT CASH FLOW .. what does that mean?
IE no positive cash flow with MINIMUM down maximum leverage.. Is that why ?
Most everything cash flows when you pay CASH.. So think you have to start there and work backwards.. If the goal is to have NET NET NET operating income on a rental. One needs to work the numbers back from paying cash to how much down will create the amount of NET NET NET one is trying to achieve. Now I get it in markets that have very slow to meager appreciation there is little reason to buy rentals if you cant get some cash flow with high leverage but in other markets cash flow really is not the main concern the main concern is just getting in the game and how much can you afford to feed it with the capital you have to put down.
Personally I think it is about 30 seconds to underwrite SFR.. take gross rents use 50% for operating expenses then deduct mortgage payments and see where you land.. if its close look at it harder if you miss by a mile then move to the next. Going to have to look at a lot of deals on deal finder to find anything that works same with wholesalers MLS etc etc.
Bottom line is investors from 2010 till the rates jumped a few years ago were spoilt rotten with being able to cash flow with Max Leverage that is not how it was before the GFC and it is not returning anytime soon.. at least IMHO your mileage may vary. So bottom line today you may need 30 to 40% cash down to cash flow positive as that is the reality of the market and the mortgage market.
I'm more referring to the irresponsibility of the DealFinder calling a deal "cashflowing" when it doesn't factor for property taxes, CapEx, or maintenance. But, do you think it's unresonable to search for a (not heavily) cashflowing deal now with a 20% down payment? What if I was in no burning hurry and had the time and financial security to wait for a great deal? Searching off market, with an agent etc. I really only need a little cashflow for securuity and padding.
well were is the deal finder ? I dont think I have looked at it just classified.. I would never use any kind of calculator for sfr .. that to me is simply napkin math.. since NO rental ever follows a spread sheet .. something is always going to cause the spreadsheet to be inaccurate over time.
What's your napkin math? To me (a newbie) it just seems kind of scary to based such a large financial decision on a napkin xD Not saying big things can't be done on napkins, I'm pretty sure Lincoln wrote the Gettysburg Adress on one.
Search for "biggerpockets deal finder" It's a free tool that scours on market deals. It's a great concept but I just see big line items missing from the analyses.
I explained napkin math above.. but to me its very simple for a vanilla SFR rental.
GROSS rent divided by 2 = gross cash flow - mortgage payment = cash flow + or - simple as that .. If you do better great and if on the napkin it is really negative then probably a pass. But if it works then next step.. 50% over time is usually about right many try to use 30 to 40% but find them selves in trouble when as @Nicholas L.pointed out when you have a bad tenant turn over or a cap ex early on in the ownership.. like HVAC Roof foundtation etc etc.
And what exactly do you mean by this part?:
"50% over time is usually about right many try to use 30 to 40% but find them selves in trouble when as @Nicholas L.pointed out when you have a bad tenant turn over or a cap ex early on in the ownership.. like HVAC Roof foundtation etc etc." What is the percentage referring to?
Appreciate the responses.
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Richard Helppie-Schmieder:
@Jonathan Warner just buy the house. You're going to learn more from your first deal than any amount of profit or loss. Let me know what day you're closing and can send you a bottle of champagne.
Be careful offering me free alchohol, bro. I'll definitely be sending you that message!
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Kate Sanchez:
@Jonathan Warner Solid underwriting work for a first deal. Rehab to add a bed/bath could boost rent & ARV. With only $110 cash flow, maybe negotiate purchase price or explore creative financing. Good luck you're on the right track!
Thank you. I always forget to attempt negotiation before giving up on a deal.
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Marcus Auerbach:
Quote from @Jonathan Warner:
Hello. I'm a newbie investor with minimal experience analyzing deals.
My agent sent me this one off-market deal yesterday and sort of got me fired up about its potential. However, I underwrote it quite conservatively and it has around -150 a month in cash flow.
Could you guys please take a look at how I underwrote it and tell me if you think I did everything properly?
1. The purchase price is around $210,000. It's a 1,000 sq ft 2BR/1Bath that has about 700 sq ft in basement space that could be converted into an extra bedroom and bathroom. I put in a conservative estimate of $50,000 for the rehab. It's ARV, based on similar comps in the area (I did this myself on ChatGPT), would be around $330,000-$340,000. I set it at $335,000.
2. A conservative estimate for the annual maintenance and repairs would be around $2,500 and annual CapEx comes out to around $1,117
- I used ChatGPT to help me with this part. It took into account the new roof and HVAC and gave me a 30-year budget estimate and annualized the costs.
-
| Expense Item | Schedule | Cost per Event | Total 30‑Yr Cost |
|---|---|---|---|
| Roof Replacement | Year 30 | ~$11,000 | 11,000 |
| HVAC Unit Replacement | Year 15 | ~$7,500 | 7,500 |
| Water Heater Replacements (2 cycles) | Years 10 & 20 | ~$2,000 ×2 | 4,000 |
| Flooring/Interior Cycle (2×) | Years 15 & 30 | ~$3,000 ×2 | 6,000 |
| Major Systems Update | Year 20 | ~$5,000 | 5,000 |
| Routine Annual Repairs & Maintenance | Every Year (30 yrs) | ~$2,500 × 30 | 75,000 |
| Total Over 30 Years | $108,500 |
Property taxes would be $490
Insurance would be $2,100
Property management would be 10% of rent which is conservatively estimated at $1,900 post-rehab, so $190 per month and $2,280 annualized
I'd likely pay around $25 a month for garbage, so $300 annualized
I assumed a new tenant every 3 years since it will likely be a family rental, so I estimated $63 a month leasing fee budget.
Improvements would run me around $40,000-$50,000 so I put it in as a $50,000 budget
I assumed a 20% down payment on the purchase price at a 6.85% interest rate.
Overall, it came out at around -$110 in cashflow. Despite it's negative cash flow, considering the rehab budget and ARV, I am still considering other ptions for the property. However, even if I were to flip it, I'd prefer the have a good exit strategy should I be stuck with the property for whatever reason. If things went sideways and I was stuck with the property, I'd be down $110 a month just hold onto it.
Any help would be greatly appreciated!
It looks like a deal mostly because of the lower price. And the price is lower, because it's a tiny house. You are correct, you are short a bedroom and a bathroom to be a family home. Adding them in the basement does only partially count. Both the market and an appraisla will not give you full value.
Financially, the issue is that most of your expenses come from things you have 1 count, regardless of home size: HVAC, water heater, plumbing, electrical, appliances, kitchen, chimney, driveway etc
Income is a function of the square footage and bedroom count and you are very low on both. Fixing up a house that has almost twice the square footage and 3 good size bedrooms will cost you almost the same. But rents will be much higher. So, the house will always have a poor income to expense ratio.
Our minimum is 1,200 sqft, 3 bed and 1.5 bath. We do finish the basment as a rec room for kids have a place to go & play during Wisconsin winter, which does not give us higher rent, but tenants stay significanlty longer.
When you start out, you think cash flow is the most important thing. After a few years you start to realize that buying a desireable home in a good location is long term more important than year 1 cash flow!
Your comment about the income to expense ratio is valid. It's something I haven't deeply considered. I may have to increase my buy box into the uncomfort zone to improve that mertic. The problem is it's my first deal and I wanted to come in a lower price point given my inexperience.
I wouldn;t consider myself a "Cashflow investor" however, again given that it's my first deal, I'd like a little cashflow padding for security in case any unexpected expenses arise. Thoughts?
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Ken M.:
Quote from @Doug P.:
@Jonathan Warner I understand and I'm telling you GPT is wrong.
The way you're refining your queries is making GPT respond in a way to confirm your own assumptions and beliefs. It's not giving you unbiased data-driven responses. It's telling you what you want to hear. While your fellow humans are telling you a reality that you don't want to hear, so you're deflecting, trying to make out that we don't like your AI friend.
I'm sorry to tell you this but you have a much bigger problem than being a new investor who's relying too much on AI for analysis. You're becoming psychologically dependent on AI stroking your ego. You need to get away from AI and seek mental health assistance from a human.
But I understand you'll just find that comment offensive. So I'll just wish you the best and hope you don't end up in a lawsuit or bankrupt from following your AI friend's advice.
@Jonathan Warner I put your response to @Doug Pretorius: into ChatGPT and it gave me this:
Your comment: "The trick is to prompt it correctly and precisely and to coach it to do things correctly."
The trick is to prompt it correctly and precisely and to coach it to do things correctly."
Gave this reply
The phrase "there are none so blind as those who will not see" is a well-known proverb that highlights the idea that people who refuse to acknowledge the truth are more ignorant than those who are physically blind. The phrase has been traced back to John Heywood, an English writer, who included it in his 1546 collection of proverbs. It is also similar to a verse from the Bible, specifically Jeremiah 5, which states, "Hear now this, O foolish people, and without understanding; which have eyes, and see not; which have ears, and hear not".
So you just put my qoute into ChatGPT and it gave you a bible verse? I'm pretty sure you mentioned some other things to intentionally elicit a biased response. You need to learn how to prompt it against bias old timer!
Post: Just ran the numbers on potentially my first deal - What would you do?
- Posts 52
- Votes 24
Quote from @Mendy M.:
Quote from @Jonathan Warner:
@Dan H. My standards are pretty high for this one. I don't think I'll be moving forward on this deal because no matter which way I cut the underwriting, it doesn't seem to cash flow, despite what my agent told me. And according to someone else here, a big portion of my costs was excluded from my CapEx and Maintenance assumptions. So it's likely even worse than my current underwriting. My biggest hurdle seems to be with comping. The comps that I have right now seem a little higher-end than the property I'm considering. And there seems to be a "financial means cap" (not sure how else to put it) for the area I'm considering. The school district is subpar and the salaries are only about $75,000 per year. I'm worried that the improvements I'm making might go slightly above what can expected from people in the area in terms of rent payments and sale price. I'm having difficulty figuring out how to nail that down more precisely. Man, I'd kill for someone to just sit down with me for 30 minutes and take a look at it.
I’d recommend looking into and speaking to a good property manager in the area, they can help guide you by giving you an unbiased opinion of what the house could pull in rent, and what it’s worth… given that is what they do daily.
They don’t have much incentive to sugarcoat things, because when you’re stuck with a poor under-performing investment later, you’re going to be dealing with them…
Another side point: the interest rate you’re assuming seems to be too low - I did a cash-out refinance investment property mortgage about 2 months ago and the rate is 7.25%
Wow thanks for the heads up on the interest rate. I do have a property manager, but herein lies my problem: My "mentor" and agent are now on the same team (my agent just joined my mentor's company), and they have in-house property management. All of my opinions are coming from the same business and I feel like there's a conflict of interest. Would it be unscrupulous to contact an outside property manager for an opinion? I feel like I'd just be wasting their time and backstabbing my agent's business.