All Forum Posts by: Robert Leonard

@Ryan Riches A good friend of mine is facing this same dilemma, also in an expensive market. I think a house-hack for 1-2 years would be beneficial first, and then start investing out of state. As your first property, it'll teach you a lot about managing and owning a rental property, at which point you can scale into other properties in more affordable/attractive markets.

Robert Leonard

@Hiren Patani Depending on your rental turnaround times, 30 days should be enough to find a new tenant. If not, you can do 60 days to give yourself more time so the property isn't sitting empty.

Robert Leonard

@Catherine Morel I agree with Matt, there likely isn't enough equity to make this deal worthwhile for both parties.

Following.

@Catherine Conklin Your CapEx and Repairs are a bit high for my usual estimates. I generally estimate about 15% in total. Other than that, the rest of the numbers look okay. Cash flow per unit (about $100) and CoCROI is far too low for me - I'd keep looking.

Robert Leonard

@Account Closed has said many times before (and written in his books), the cost of a roof is the cost of a roof. It doesn't vary much for a $15k house to a $100k house. That being said, you'd need to allocate a much higher percentage of income for a $15k house than a $100k house to cover major repairs. I'd recommend increasing your estimates for those costs, but other than that, it looks like an interesting property, especially for a contractor!

Robert Leonard

@Bradley Klesius 

Your vacancy is a bit low for me, personally. I generally like to use about 8% (one month per year). Anything less than that when actually renting the units is just bonus, or can pad your reserves. 

I also don't see any estimates for CapEx and Repairs. Generally, I use about 15% for these in total (10/5).

Increasing your vacancy and adding CapEx/Repair costs will make your already negative cash flow even more negative.

I'd pass on this deal and keep looking.

Robert Leonard

@Ryan Brady Most of your estimate percentages look pretty accurate. I can't comment on the accuracy of the expected rents, but the expense estimates seem reasonable. Vacancy might be a little low, I generally look for about 8%, but 5% is not bad. 

That being said, at NEGATIVE $200+ per month in cash flow, not a property you'd want to pursue...

Robert Leonard

@Catherine Conklin I believe you are missing two big numbers - the down payment and the interest rate (unless its a 0% down lown or you found someone to lend you $89 for free, which I think is unlikely). 

Since you have no down payment in, that's reducing your "cash needed" for the deal, which is increasing your CoCROI. If you included the down payment, this CoCROI would come down significantly. 

Vacancy of 3% is FAR too low for me, personally. I generally use about 8% (one month per year). Repairs and CapEx are also a bit low - I generally look for these two to total 15%.

Robert Leonard

@Robert Freeborn I believe it has to do with you using negative numbers. I don't believe the purchase price (and similar numbers) should be negative.

Robert Leonard