All Forum Posts by: Steve Balinski

Sounds like you don't have realistic expectations for your market and ROI.

I talk to newbies about this same thing all of the time- they've read a forum post or connected with some guru who has given them unrealistic expectations for what the market can do TODAY and it creates fear and inaction. 

So worst case senario in your analysis above, you are making an extra $220 per month, someone else is paying down your debt and it's growing in value over time passively?

For what it's worth, those numbers would be a killer deal in my market and I'd buy it myself. 

I'm not saying you should buy THIS property, but I am saying this is a marathon, not a sprint. Wealth comes from holding assets over time and letting them grow and mature. If you are only paying attention to what they will do on the first month, you'll be sitting on the sidelines forever. 

What about vacancy rates and leasing fees ? ...they can significantly impact your numbers. It's a good idea to use a standard spreadsheet or one of the online calculators. You can find one on BiggerPockets, calculator.net, rollytally.com or baselane ROI calculator.

Hey Steve, a lot of investors are feeling it right now with rates and prices where they are. Some are finding better cash flow by searching to more investor friendly or out of state markets where the numbers still work, especially on small multi or light value add deals. You've already built a solid foundation so it might just be time to shift markets or strategy for the next one. 

Have you tried looking at longer term mortgages (eg 30 year)?

Steve - To me, it varies whether you use an "overall number" or % of income depending upon the expense item. 

My general "rule of thumbs" for single families and multis are:

- Property management: 7-10% for single family (based on my market) or 4-6% for larger multifamily.

- Insurance: .75-1% of value of the property for single family (Better to get an actual quote); multifamily I use previous owners estimate or get new estimate.

- Taxes: Varies too much. I typically look up on the county website and get the actual number. 

- Maintenance/Repairs: 7% of income for single family; $400-$500 per unit/year for multifamily

- Reserves/Cap Ex: 5% for single family or $300 per year per unit for multifamily

For multifamily I also include a "releasing/unit turn" expense in the expense base. That typically assumes that 1/3 of the units "turn" in a given year and then I guestimate expenses to "turn" a unit, which might include painting and other minor repairs.

In total I see smaller multifamily property expenses in the 35-45% range, and larger multifamily in the 40-50% range., 

One of the best books to understand expenses for multifamily is Brian Burke's book, "The Hands Off Investor."

Good Luck!

at least 10%.