Posted by JohnBoy on January 13, 2001 at 03:13:13:
You need to account for all expenses. Taxes, insurance, any utilities, repairs and maintenance, vacancies, trash, snow removal, deferred maintenance, etc.
These are all one bedroom units which are usually harder to rent and have a higher turn over.
Estimating 40% for all expenses your monthly net operating income is $1,920.00 minus your mortgage payment of $1,882 leaves you with $38.00 per month cash flow. That’s $4.75 per unit, per month.
If you paid $260k you would be buying at an 8.86% cap rate. That’s low, especially for one bed units.
Figure closer to a 12% cap rate which would place a value of $192k using a 40% expense factor.
Putting 10% on $192k and financing at 9% over 30 years like you were figuring, your PI payment would be $1,383.95.
$1,920.00 net operating income after expenses, minus your mortgage payment of $1,383.95 = $536.05 per month in cash flow. That’s $67.01 per unit, per month.