All Forum Posts by: Nikita Sharma

 @Chris Seveney Thank you! I had a feeling this might be it but couldn't find material that confirmed it in these simple terms

No PMI! Just homeowner's insurance

@Aaron Breckenridge

Hello,
I purchased my first property recently. 

In the closing costs, I prepaid for 1 year of property insurance. 
In this case, I would assume I would not be paying monthly insurance premium for the first year, because, I have prepaid one year.

However looking at my upcoming monthly payment, it looks like the insurance premium is still included. Why? Am I not double paying in this case?

Hi everyone,
I just started looking into my first property to invest in (SFR or MFR). I am setting up the cash flow and appreciation expected for the first 5 years after purchase. I had a question about annual property tax and insurance over the first year.

These usually sit in the 'expenses' section of my Proforma, however during the first year, I understand that property tax and insurance are included in the closing costs after purchase. To make sure I'm not double counting these costs, do I remove them from expenses?

I am asking as whatever decision I make will impact my calculation of cash on cash return over the first year.
1) Option 1- Since tax and insurance are included in the closing costs, I remove them from expenses, which will effectively increase my cash flow calculation for the first year.
2) Option 2- I leave them in expenses, but subtract them from closing costs. For example if taxes and insurance summed up to be $2K, and total closing costs were $3K, I would subtract this and be left with $1K closing costs ( the $2K taxes and insurance would be reflected in expenses). This would impact the denominator of the cash on cash calculation, as total money put into the investment would be reduced by $2K. 

What do you typically do? (for additional info, the properties I am looking at are in Ohio)

Additional questions-
What do you typically use to estimate tax and insurance for a potential long term rental property? Any reliable websites or tools?
If you have any guides or examples on how to set up a cash flow analysis, that would be super helpful. I am currently following an example from a book.
Thank you so much!

Hi folks, 
I'm a newbie looking for my first investment property (sfr or mfr). The last property (located in Akron, Ohio) I analyzed had a 3.5% cash on cash return (including closing costs), which is much lower than what I typically see as the recommended amount on articles I read (8%+ recommended). I am looking for cash flow so this was a bit lower than what I wanted. I am located in CA so I am looking primarily at out of state properties.

I am wondering, for other investors focused on cash flow looking to buy in 2023, what cash on cash return rate are you looking for? Or if you have already purchased a property this year, what cash on cash rate are you expecting? Is 2023 just a tough year for cash flow?

@Najma Osman Thank you Najma! Just replied :D

@Vadim F. I am looking at Akron, and aiming more for cash flow

Hi! I've been lurking on bigger pockets for a few years now, excited to finally be taking a dive into a first potential investment. My biggest goal is to maximize cash flow.

I've been working with a particular turnkey investment online service that has listings in Ohio. This service seems to be highly recommended on bigger pockets. I already have a preapproval and am comfortable with a purchase price of up to $180,000. One thing that was attractive to me with this service is that they already have property management in place and will help find tenants once the property is rehabbed.

I'm a bit worried about the pre prepared proformas they have for each of the available properties. For example, this one proforma I see for a property valued at $159000 assumes a 6.25% interest rate on a 30year fixed mortgage. Now I've talked to several lenders, and while this could be a potential interest rate for an aspiring homeowner, it is much too optimistic for an investor. The rate I was quoted was 7.125% with 2 and a half points purchased ( I have good credit at 750+).
Moreover, there is a promotion from the turnkey service where the first year property management fee is waived, therefore it is not listed as an expense on the proforma, which only covers the first year. With the lower 6.25% interest rate and no property management fees, the first year cash flow appears to be fairly healthy- $3864 annual cash flow on a total down payment (adding assumed $5K closing costs) of $44,750 (8.63%).

Now if I take the higher interest rate into account (7.125%) with the purchase of 2.5 points, that increases the total money put down to $48,725. And with the addition of the property management fee (assumed to be 8%), this increases my overall expenses and brings down cash flow to $1662 annually. The cash flow is now a bit disappointing- $1662 annual cash flow on a total down payment of $48,725 (3.4%).

I guess I just want to get some agreement that this is not a great investment. Any thoughts on this? I'm also happy to provide more information if that would help.

Note- I am a true beginner, I just graduated last year and since I don't know anyone else who does this, I'm literally following the instructions in a book. Please let me know if there is something wrong with my reasoning above.

Thank you all in advance!