Initial forecasts for improvements were conservatively $1000. Remember, the goal is to be in good, safe, and clean condition, with amenities appropriate for the neighborhood, not amenities which you would demand for your own home. Improvements: Any improvement needed to get the property ready for rental. My mortgage rate for new properties will rise as the Fed raises interest rates, but should be affordable for some time. Roughly in the same ballpark I’ve gotten on my last few properties. The rate I got on this property with a 750 credit score was 4.625%. Interest Rate: Also because it is a investor mortgage, the interest rates are slightly higher than consumer. Fannie Mae requires that investor loans on multifamily properties be 25% through the first five financed properties (after which it becomes a 30% downpayment). Evaluate Rental Property Based on the Numbersĭownpayment %: Because this will be an investor mortgage on a multifamily, I will need to put down 25%. You could do better/worse/differently with more exotic financing, but these are fairly standard, which may help those with no idea what to expect. Now, let’s start plugging in numbers I feel comfortable with. The duplex is in above-average condition for the neighborhood and will rent for approximately 650 per unit. That deal fell through and I moved on it quickly. The unit was priced too low for the market and was pending within 24 hours of being on the market.
BIGGER POCKETS RENTAL PROPERTY EVALUATOR CODE
The average household income for this part of the ZIP code is approximately $40K. It’s a 2/1-per-unit duplex located in a C+ neighborhood with somewhat below standard schools. This version also has some tweaks that are specific to the area/property management but if you decide to use my copy as a basis for your own, it should be pretty easy to figure out.Ī Single Family Home (SFH) Rental in the South
The version I put there contains real numbers for a property I recently purchased in a major midwestern market. I’ve uploaded my modified version, which corrects a few Excel issues with the original, and enhances it somewhat to allow for evaluating duplex/triplex/small multifamily units. My analysis spreadsheet is based on the J Scott Single Family Home analysis spreadsheet on biggerpockets.
I’m a California resident and have found that the best deals in my price range are out of state, even after accounting for property management.
That is not to say that quality of neighborhood, tenant, and prospects for the city aren’t just as important– they’re just things that I consider before I ever get to evaluating the raw numbers. Thus, my analysis makes bottom-line cash ROI the most important factor versus appreciation. The goal is to build a steady stream of income that compliments the safe withdrawal rate from my stock and bond portfolio. My own real estate investment strategy is buy and hold for cash flow. This is usually because people fail to consider all the possible costs of buying and owning a rental, and/or because they are overly optimistic about vacancies, repairs, etc. I frequently answer questions about whether or not a given property is a “good rental.” Though this is a highly subjective question, many rentals people consider are virtually guaranteed losers.
BIGGER POCKETS RENTAL PROPERTY EVALUATOR HOW TO
I have a few cash flowing properties, and each has been more successful than the last as I raise my standards, learn how to anticipate some of the trouble areas, and most of all, have greater confidence in my ability to oversee all aspects of a deal. However, I’ve done a few deals now, made a few mistakes, and hopefully learned something from them. Relative to many veteran landlords, I am a rank amateur. I am still learning, just like everyone else. Knowing how to evaluate rental property by the numbers is as important as picking good property management and placing good tenants.
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