All Forum Posts by: Joseph Ducharme

I moved to Charleston last year and I’ve been living in a house that I own. I’ve been looking to purchase another property as a rental to hold onto long-term. I am currently under contract on a new construction condo about 25 minutes north of me, in Summerville. I look forward to being part of this community and leaning on the expertise of more seasoned investors.

Hey @Joseph Ducharme, congratulations on finding a great cash flow deal!

Metro Charleston is one of the markets that interests us as well.

If you'd be willing to share, what cash flow and cash-on-cash return are you projecting to earn?

Target rent is 2200, my expenses will be around 2050, so cash flow of 150 (not including vacancy).

OK, I would urge you to be very, very careful here...

Certain operating expenses are paid monthly from lender escrow, so it's easy to assume that any costs not paid this way are somehow "optional."

They are not!

Vacancy, property management, repairs, maintenance, and capital expenditures are all MANDATORY expenses. If your financial analysis doesn't accurately capture them all, you are headed for DISASTER!

I say this because this is exactly what happened to me in 2007. I didn't know my financials, so when the real estate market turned ugly I only then discovered that I had been negatively cash-flowing for years without knowing it.

Had I known better, I would have improved the cash flow for those properties I could, and dumped the losers I couldn't fix. Instead, the whole mess came crashing down around my ears!

Also, you mentioned this is a condo. That means that even at $150/mo cash flow, you're just one association fee increase (or special assessment) away from losing money every month!

Beware!

To give you a further breakdown
Mortgage 1300
Association fee 260
Taxes 290
Insurance 40
Property management 8% 176
Total 2066

All exterior maintenance is covered by the association fee. Being a new construction, all the appliances inside or warrantied for five years. I didn’t include vacancy, but that 150 should be enough to break even if you wanted to include that in the cash flow. Additionally, because it is a new construction, it is taxed as raw land for the rest of 2024, which will only be about $30-$40 of taxes for the remaining seven months of the year.

I appreciate the input!

1 Vote

Charleston, South Carolina

Quote from @Patrick Roberts:

Awesome! Charleston has a very active REI community. If you haven't attended any of the local meetups, I strongly recommend getting involved with that. Cashflow is hard to find here, but my guess is this market will continue to appreciate for years, especially in good areas.

I'm local to downtown Charleston. Let me know if I can ever help with anything.

Patrick

It certainly is! that is why I’ve been looking more towards affordable areas like Summerville. Where do I find these local meetups?

0 Votes

Charleston, South Carolina