hi,
relatively new to the game. i have a property with good potential in an area i think will appreciate well. in my current situation, i am not strapped for cash and can save 7-8k month for real estate purposes alone with my current job. this will be by first SFR and goal is to have at least 12% COCROI and have a minimum of $150+ using the 50% rule. im more or less in it for the long term game and want to retire with a rental portfolio that can supplement my income within the next 10 years.
here are the two scenarios for the following property:
property: $65k
rehab costs: $10k
closing costs: $3,200
wholesaler costs: $2,500
i plan to put 20% down on a 30 year fixed loan at around 4.8%
Scenario 1:
I cover out of pocket for rehab and wholesaler costs as well as downpayment + closing costs
Property: $65k
Rehab: $10k
Wholesaler costs: $2,500k
Downpayment: $13,000k
Closing costs: $3,200
Total cash needed: $28, 710
COCROI: 12%
Monthly cash flow: $288
50% rule: $313
Scenario 2:
I finance the rehab and wholesaler costs through my bank. Only thing I pay out of pocket is downpayment + closing costs.
Property (putting rehab and wholesaler costs into property): $77,500
Rehab: $10k
Wholesaler costs: $2,500k
Downpayment: $15,500
Closing costs: $3,200
Total cash needed: $18,700
COCROI: 15%
Monthly cash flow: $235
50% rule: $287
I'm having a hard time figuring out what's better for my current situation and long term goals. I want to be able to have decent cash flow and cash ROI (which I have with both scenarios but clearly one is better) and I also want to have a good long term investment. What's better for me?
Thank you
Rubin
