Re: Financing help/question… - Posted by Jeff S
Posted by Jeff S on December 19, 2000 at 20:02:17:
How much are taxes and insurance (NC I assume)?
so from your numbers I guess you are using $109,000 financed at 30 years for around 7.5% to get $762 a month then add PMI, insurance, and taxes.
Let’s assume you rent the place for $1,200 a month(your high number), estimate taxes at $100 per month, $25 for insurance and $50 PMI - tenant paying electric, water, etc. and a zero % vacancy factor. That means that the Cap Rate on this property would be $12,300(NOI)/$121,000(sale price) which is 10% (a pretty thin spread on even a 7.5% scenerio). I’d rather see this number in the teens.
Let’s do it another way and figure out the ROI. You have $9,132 = $761 * 12 which is your debt service per year. Your cash flow is $12,300 (NOI) - $9,132 = $3,168. That’s an annual ROI of 26.4% on $12,000. This is your high end with very conservative expense numbers.
I have a 2-family that I bought for $92,000 that brings in $1,410 and $175 in expenses. $1,235*12=$14,820-$10,128=$4,692. Even if I put 10% down($9,200), which I didn’t, that would be 51% ROI. Also it’s a 16% Cap rate.
I think I’d rather flip this property that you are talking about since you said it’s market value is much higher than the sale price. (Unless you can get more rent out of it.)