All Forum Posts by: Kristopher Windsor

@Krystian Sosinski - thanks, good to know.

Yes -- if there is no contract, why do you owe them so much service? Why should they keep paying rent?

EDIT: Penny Clark beat me to it.

@Ryan Gillette - thanks very much!

I just checked the rates at my bank, it is .01%. Why would I keep a savings account that earns $5 / year? So I don't. But I have $5,000+ in my checking account. Other banks will pay ~1% interest, but I'd rather get 2.5-3% in bonds. Savings accounts just don't make much sense these days.

How would you apply this advice to the OP's situation, being from San Francisco? I'm not sure if SFHs in Sacramento will cash flow. Would you recommend the smaller cities in that vicinity? Does 2-4 hours of driving count as "close to home?" Thanks.

@Ryan Gillette -- Thanks!

Thanks. When I do end up buying, I'll try to get near this number instead of just taking the best of 2-3 loan quotes.

Good catch -- the closing process and costs are a mystery to me. I should read up on that.

This is a fair point. I'd have to take a close look at the unit interiors too instead of just thinking "they must be good since they are occupied."

My thoughts yesterday: if the previous owner can prove long-term tenants have been paying $X, that must be a fair market rate.

My thoughts today: maybe that was a fair price when the tenants moved in, but then the landlord raised the rents, or the market rate went down, but the tenants didn't feel like moving to save $100 / mo.

Yes, and I guess the numbers I have are worthless without confirming this. If my assumption (that landlord pays utilities) is wrong, I'm calculating only half of the actual cash flow.

Will do. Anything to make the numbers more accurate should help.

I'll read up on that.

I'll read up on those more too.

Thanks,

The house across the street sold last summer for $70k:
5341 David Blvd, Port Charlotte, FL 33981

Not the most recent sale, but might be the most similar house. Worth checking.

This is similar to 5319. But it speaks to the purchase price, not the potential ARV of 5319.

Hi, I'm new.

I want to make sure my math is right and that my cost numbers are in the right ballpark so that I can estimate cash flow before I buy my first property.

For practice I am looking at this one: 6432 Clark Rd, Paradise, CA 95969

My numbers are based on the data I found online; I would need to confirm and verify many things before actually purchasing.

Purchase:

• Sale price: $99,900
• I would try to buy it for $95k (it has been on the market a long time)
• Closing costs: $3k (realtor / paperwork) + $1k (my travel costs during closing, possible home inspection, etc)

Loan:

• In this scenario I am looking at a $60k loan and $39k cash
• Assuming I can get a 30-year loan @ 5.5%
  (Is this a reasonable assumption? I have no debt and a decent income.)

Monthly:

• $1,320 Max gross rent ($15,840 / yr)
  Source: the listing
• $200 Property repairs / maintenance
  Source: guess? I am assuming the roof and septic do not need immediate repairs; I would check this before buying
• $175 Utilities (water / gas / electric / trash)
  Note: I am not sure if the tenants pay for this / would need to check
  Source: guess? and personal experience on typical utility costs
• $174 Mortgage interest (51% of $341 total mortgage payment)
  Note: I know the mortgage payments are front-loaded with interest, but the long-term average is a more fair number in my opinion
  Source: mortgage calculator and loan rate assumed above
• $167 Mortgage principal (49% of $341 total mortgage payment)
• $132 Property manager @ 10%
  Source: forums / guess?
• $119 Expected loss of rent (vacancies and non-payment) @ 9%
  Source: rental vacancies are 1% vs 25% of homes rented, general lack of income in the area suggests higher chances of non-payment
• $95 Property tax ($1,140 / yr)
  Source: based on property's tax history, tax is 1.2% of assessed value; assuming assessed value = purchase price
  
• $80 Property insurance
  Source: guess?

Tax considerations:

• $144 / mo depreciation on the buildings (taking half the purchase price over 27.5 years)
  Source: approximation?
• Mortgage principal is not tax deductible and cancels out depreciation and then some (extra $6 / mo towards tax)
  Note: this might be a non-standard way to present this calculation, but I think it works?
  Source: assume 25% tax on the difference ($167-$144)

Totals:

• $172 / mo cash flow
  Source: $ ( 1320-200-175-174-167-132-119-95-80-6 )
• 5.3% Cash on cash
  Source: $2,064 / yr cash flow over $39,000 invested
  
• 2.1% Cap rate w/ mortgage
  Source: $2,064 / yr cash flow over $99,000 total cost
• 6.2% Cap rate w/o mortgage, and the depreciation deduction remains
  Source: $2,064 / yr cash flow + $4,092 / yr mortgage over $99,000 total cost

Do my numbers look right? Wrong? Thanks,

I tried to do this a couple years ago, but LendingClub thought my loan was risky (although I had good credit) and offered me a ~25% interest rate, which I didn't go through with. So, this route might be less of an option than you think.