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Who owns investment property?

Ken Fenner

Fuckhead
Don, I haven't disected the formula yet, this is what is printed in the finance section of one listing.

Asking price: $184,900
Rent 1: $800
Rent 2: $800
Rent 3: $150 (garage)

GRM: 8.68
Cap rate: 8.99

Total Ann Exp: $4,674 (property taxes)
Net Operating Inc: $16,626


The Breakdown and questions:

At a 5.5% rate on a 15-year mortgage and factoring tazes and insurance I would have a nut of $1,160 per month. My out of pocket will be about $55,000. Positive cash flow over the fifteen years will be about $10,000. That should cover repairs or is that far too low? Both units have new electrical and panels, new appliances, new carpet, new HVAC, and water heaters are two years old. Rubber roof is four years old. I figure an additional $20,000 in expenses over the 15 years for moveouts, property maintenance, etc. These units do not stay empty. the area is desirable and actually hard to find two bedroom units.

Investment: $55,000 (down payment and settlement)
Operational Costs: $20,000
Property value at end of loan term: $300,000 (these units were selling for $235K 18 months ago)

So is turning $75,000 into $300K over the course of fifteen years a good bet? With yearly compounding, that comes out to an interest rate of 10.5% per year.

You guys that have owned investment property, are the parts that are bolded above realistic?
 

Tim Fields

New member
Positive cash flow over the fifteen years will be about $10,000. That should cover repairs or is that far too low? I figure an additional $20,000 in expenses over the 15 years for moveouts, property maintenance, etc.
So is turning $75,000 into $300K over the course of fifteen years a good bet? With yearly compounding, that comes out to an interest rate of 10.5% per year.
Ken,
We don't really count on spending the positive flow when we put the minimium down. It does build up on some properties and is nice to have, we just don't make it a part of our spending budget.
We fiqure 7% total on average for vacancy, turnover touch ups, and minor repairs. That would put me close enough to your $20,000 to be comfortable.
Our average tenant stays a little over three years so we actually do a bit better than we plan for.
I wonder if the $75K into $300k question would be better phrased as $55k into $300k as after we get to closing, the property is expected to cover all of it's own expenses.
Thanks,
 
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