Formula for rentals

Rehabbing, Fix and Flip, Rental Properties
1

Is there a formula that you folks use to determine an appropriate offer price for rentals, so that you can still obtain a positive cash flow? I’m trying to make one now, taking into account variables such as closing costs, property taxes, mortgage interest rates, property management fees, expected rent, etc. But I thought someone on here might already have something like this, or at least something to get me started so I don’t have to completely reinvent the wheel ;D

Thanks,
Travis

2

Try this …

http://www.reiclub.com/forms/cashflowanalysis.xls

3

Travis,

I’m not sure how “closing costs” would be considered a variable as to whether the subject property will cashflow or not - the other items you mention certainly do.

Using a similar formula to the one that NoMoneyDown pointed you to, you create can a “pro forma” (latin: the form it will take) for the property. You will have to know the P/I/T/I numbers, the management fees, expected maintenance fees, vacancy rate, etc.

Keith

4

Thanks NoMoneyDown and Keith. I was hoping to include the closing costs into the loan so that I do not have to use my own funds up front. Closing costs in my case would just be added to the principal. I did this with my personal home, and I assume I can do this with an investment property as well.

The spreadsheet I came up with last night actually yielded very similar figures as the one that NoMoneyDown referred me to, but mine is much more ugly lol.

Thanks again!

5

Depending upon the property and your financial stability, you sometimes can roll some of your closing costs in but then they really just become part of the “P” in the “P/I/T/I”…

I was doing te paperwork for a cash-out refi the other day and the bank I use has relativley low closing costs. The Loan Originator said that he can actually roll the 1% loan origination in by using a bit higher rate. In this case, it’s only a $52K loan so it’s not a huge deal.

Remember if you do 100% loan, you will have to do something like an 80/20 split or pay MIP.

Keith

6

I am new to this spreadsheet and landlording. Would someone define “debt coverage ration”, “capitalization rate”, and “computed internal rate of return.” What do they mean and why are they important?
Thanks
Lyle

7

Try http://www.reiclub.com/real-estate-terms.php

8

Thanks
New to the site and did not know this existed.
Good source if info.
Lyle