All Forum Posts by: Scott Lyons

Not sure if this is the right spot for this but if you've seen any of my other posts you know I'm a newbie (zero properties so far). While my plan is to start small (2-4 unit multifamiles), I came across a property with ~30 units that lists for 1.3M. I'd love to eventually get to this point and I've read and heard on the podcast that you shouldn't necessarily start small, so I figured I'd try to run this property through my calculations.

That being said, I'm trying to understand some of the additional costs that may be involved with a property of this size. No doubt I would hire this out to a property manager, which I've been told to estimate 8-10% of revenue. I'm still estimating a 10% rental fee. Besides the obvious costs like utilities, insurance, maintenance, and taxes, are there other ones I need to know about and what they would run? The only other one I can think of is waste management/trash removal fee but I have no clue what this would cost.

Following as I live in Mariemont, just right down the street from Madisonville (where I use to live) and Fairfax.

I'm a newbie investor but was born and raised in Cincinnati and went to the University of Cincinnati which is very close to OTR. I have loved OTR and it's historic architecture long before it was cool (prior to the riots). I still think it has huge upside as there is still so much inventory and vacant run-down buildings. It will still take a long time for it to get to 100% but it's well on it's way. Definitely my favorite area in the city and my wife and I go down there every chance we get.

While the new stadium will be in the West End it's close enough to have a big impact on OTR.

As I said, I'm a newbie investor but open to connecting with anyone, especially relating to OTR.

@Randy Forcier Thanks for the comment. I'm a new investor so I've just been estimating 10% vacancy, 10% property mgt, 10% repairs and maintenance as that's what I've been given as a general rule of thumb....Good point on the insurance, that as an estimate as well so I'll try to call around to get a more accurate numbers.

I think the rents could probably go up a little but not very much. One tenant has been there 6 years so the vacancy would perhaps be lower but could see that changing if I do raise the rents. 

Hi,

I'm looking at a two unit (1br+3br) property that I'm interested in and was hoping for your all's feedback on it. To me the numbers look pretty good, however both tenants are on a month to month (not sure if that is good or bad) but would be willing (so I'm told) to sign a 1 year lease which would be part of the contract. It was owner occupied so I'm having trouble verifying the rents and it's in an decent area but there aren't a lot of comps when it comes to rent. 

List price: 130k

Est Purch Price: 120k

Repair costs: 1k (based on what I know now it needs very little repair)

Closing costs: 3,500

Cash down: 30k @25%

Current rents: 1,500/month

Income: 16,200/yr (includes 10% vacancy rate)

Expenses: 7,580

-1,800 repairs

-1,800 property mgt (but plan to do it myself, at least initially)

-2,880 Taxes

-1,100 Insurance

-Tenants pay water/heat/electric

NOI: 8,620/yr

Any thoughts/opinions would be appreciated or if there are other numbers I should be including/looking at. Thanks.

The vast majority is estimates. From what I've seen so far very little info is provided in MLS listings. I'm lucky if I find rents and that's about it. So I estimate everything else. I've updated my spreadsheet for the following:

Vacancy rate - 10% of gross rents (I estimate rents if not provided but no idea how close I am)

Repairs - 10% of gross rents

Taxes - I pull this from the county website. I estimate based on estimated purchase price, not what it currently is valued at.

Utilities - I just put a number in there, no idea if I'm accurate. Very rarely does it say who pays.

Cap Ex - 10% of gross rents.

Property Mgt Fees -10% of gross rents.

After I enter all that I'm usually in the red in my calculations considering 40% of rents is estimated in expenses on the 10% rules. Then add in taxes, insurance, and utilities and I haven't found many deals that look good. Granted I think this is conservative but I'd rather be conservative here.

My problem is I can estimate and put all this into the calculator, but I'm not sure what is actually considered a good deal. My cap rates end up very low and my before tax cash flows look just okay. Net Income after taxes is in the red but maybe that is good for tax purposes?

Oh, one other question re capital expenditures: how do you calculate for those? Since there capital they wouldn't go into the NOI, correct? Also, wouldn't these be depreciable?

Thanks for all the answers.

@Elliott Elkhoury

- I plan to talk to a lender this week so appreciate the heads up.

- I'll bump up my vacancy rate, I had been using an estimate from a template. I'm not really sure what a good estimate is at this point.

- Will bump up my repair estimate.

- Thanks for the REI Guard reference, I'll check them out.

- Any idea the best way to estimate utilities? I am inquiring but it seems like hardly any MLS listings provide this info and in order to do a quick analysis it'd be good to be able to estimate them.

Hey Max.

Thanks! And yes, this would be my first rental.

Hi All,

First time poster here and brand new investor (zero purchases so far). Was hoping some could keep me honest on a property I'm looking at. Unfortunately I accidentally used up all my free BP calculations and just used a spreadsheet but was curious as to your all's thoughts. So far everything I've obtained is from the MLS. Numbers are annualized except where noted.

4 unit (2-2br; 2-1br) - Decent working class blue collar neighborhood - not nicest area but not the ghetto.

Est. Purchase Price: 179,550

Cash down: 35,910 (20% @ 4.5%) - not sure what rates are for rental properties.

Closing costs: 2,500

Current monthly rents: 2,505  

Vacancy: 5%

Repairs: 1,503 (estimated at 5% GOI)

Property Mgt: 3,006 (10% - though plan to do it myself to start)

Taxes: 5,875

Insurance: 1,000 (ballpark as I'm not sure typical insurance costs on rentals)

Utilities: ? (listing does not say if utilities are separated).

Based on above I calculated 

NOI: ~17k

Cap rate: 9.6%

Before tax cash flow: 6,274

2% rule: 1.4%

Cash on cash return: 16%

GRM: 5.97

Let me know if I'm missing some key data points to consider and whether at face value it seems like a good/bad deal.