Originally posted by @Jerrad Dumont:
Hello Everyone,
How am i supposed to tell if something is a good deal? What numbers are your rule of thumb? I am able to add up all the bills to figure out what i would have to pay each month, as well as see what i will need to bring in each month. Realistically I am curious on how much profit each month is enough profit? Do you do your numbers based on a 30 year mortgage or on a ten year mortgage.
Right now i currently own a single family home with 5 bedrooms, rent to college kids at 2000 per semester. Bring in about 23000 per year, but i did a ten year mortgage instead of a 30 because i wanted to get it paid off and start rolling. only had it for about 4 months and haven't made it through a whole school year yet but it seems to be going well. Not any extra income yet but it is really paying for itself which makes me happy but isn't generating anything to purchase anything new.
Any thoughts on these?
If rental cash flow is your goal, that usually means positive monthly cash flow from the property. Your mortgage payment amount makes a huge difference if you cash flow or not and so does expenses. The difference between the payments on a 10 year mortgage and 30years can be towns apart. A 10 year mortgage isnt an excuse to raise rent.
Using an SFR for instance, if you are to cash flow, rent at a minimum should equal:
Rent=Mortgage payment + Operating Expenses + Required Monthly CF
or
Rent=Total Expenses + Required Monthly CF
If you are told any different, the objective isnt CF.
What you will also find is that in many markets, the market rate (what people can pay) for rent may be lower than just the mortgage payment alone or lower than total expenses (mortgage payment + operating expenses), in which case you will have a negative CF -- translation, find a property that actually does CF.
