At the moment, my business partner and I are working on a 300 unit MF development with a $68 million total capitalization here in North Texas.

Affordability: Compared to coastal markets, Midwest properties offer significantly lower entry costs, allowing investors to acquire more units or higher-quality assets for their capital.2.

This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall annual loss.

While the project was profitable, managing unexpected costs required careful oversight.

No matter how well the home is designed and priced, vacationers will click away as soon as they feel like a host is inflating costs. 

Hi Christopher,These calculations are pretty standard on 1-4 Unit properties..Income/(Mortgage+Taxes+Insurance+HOA) = DSCR RatioHowever on commercial properties some lender may take into account vacancy, upkeep and other costs.

Well worth the extra cost to have a product that lasted 30 years.

In need of a full rehab so not sure how much that would cost I’m thinking $70k?

The other option is if you can do a lot of the work yourself and know all the trades and can trade business with them.   

My business partner and I have a joint LLC (shared business bank accounts / credit cards / etc) - pretty standard stuff.