All Forum Posts by: Kevin S.

@John Kelly Okay that makes more sense, when you post a "help me analyze this deal" it's always a good idea to give background like "using a NMD deal through a VA loan."

I couldn't look at your new numbers because the link you posted doesn't work, but if you're scrapping the bottom of the cash-flow barrel here or not even cash-flowing at all really no matter how you work the numbers then you are paying too much for the property to be worth it and it's time to either 1) get the seller to lower the price till the numbers make sense, or 2) move on to another property.

Good luck!

@John kelly I can't tell if this is a SFH or a duplex or what, you don't give enough info. I'm going to assume it's a SFH investment property, meaning to get a loan you're going to need at a minimum a 15% downpayment or $93,750 which brings your total cash needed to $103,750. Additionally, you didn't budget anything for CapX (10%), repairs (at least 5%) or vacancy (8%). That's a total of 23% of rents each month withheld in addition to what you already budgeted, which equates to $1,167.25 in additional monthly expenses. At a zero downpayment that means this property doesn't cash flow, which means that if you make a downpayment and it does cashflow all you are doing is buying cashflow. Overall, at that price not a great investment IMO.

@Account Closed you and me both

@Neal Bawa Great breakdown of why the 1% rule should only ever be a general, quick rule of thumb, not a standard to live by. Quick question for you regarding churn, if your floor is somewhere between $38k - $45k depending on the area, do you see any kind of ceiling in the data that suggests that, past a certain income, there's more churn due to people in that range only renting short-term until they can buy a home of their own? Or is that fairly evenly spread throughout the $45k-plus zone?

@Kevin Barnard Congrats on picking up 3 more doors! Looking at your report, the only thing you might consider changing is upping your vacancy to 8%, that way you have about 1 months rent saved up every 12 months (1/12 = 8.33%).

@Michele B. he's including his down payment/closing costs/loan points & fees in his total cash needed, so it's reflected in his Cash on Cash return

Welcome to BP @Seth Santo Domingo!

@Laila Farally Looks like several of your expenses are under-estimated, vacancy should be about 8% to give you 1 month of rent saved up each year, CapX of 5% seems low, typically that would be around 10%, and management of 4% is definitely low, usually companies charge you around 10%. With those increases (a total increase of 14%) that wipes away $343 of your projected cashflow and puts you into negative cashflow post-refinance.

@Ari Bildner about the only change I'd suggest is to up your Vacancy to 8% since that'll give you about a month's rent saved up each year (1/12 = 8.33%)

@Gregory Press I would definitely increase your vacancy, I typically use 8% as after a year you'll basically have 1 month's rent saved up (1/12 = 8.33%). Additionally, I saw you didn't have anything on there for CapX, is that because you plan to fix everything with your $15k repair budget? I would still have a % for CapX of AT LEAST 5%, though I usually go 10% for CapX. Finally, management % looks low, typically you see management as being 10% of rents. After accounting for 8% Vacancy and 10% CapX and 10% management you'd be left with $212.41 in monthly cash-flow ($70.80 / door).

@Jack Bradham I'd up Vacancy to 8% since that would give you about a months worth of rent saved up every year (1/12 = 8.33%), you also didn't budget anything for CapX (8-10%), Repairs (5%), Insurance, or Management (10%). When you do all that it basically wipes out all your cashflow. And considering that since that is after a 25% downpayment, I'd say this isn't a good deal, at least not at a rental rate of $1,400/month.

In general, a quick check is the 1% rule - is monthly rent at a minimum 1% of the purchase price? If not and there's no way to cost-effectively value-add to increase rent up to where it does meet that, then from a cash-flow standpoint it's probably not a deal (if you buy for appreciation it's an entirely different thing).