Good way to practice cashflowing #'s?

General Real Estate Investing
1

Could comebody put up a few practice problems, so I can practice and make sure I got exactly how to to figure up whether a property wish cash flow or not.

Ive looked at plenty of other threads, and it makes sense, but I would like to see if I can do it by myself.
:help

2

Well I’m sure you’re familiar with 50/50 rule. When it comes to calculating a profit. I think it’s a good idea to factor in your profit before you end up with your debt service number. I’ve learned that having a minimum (like $100/unit/mo.) is a good to have. The best way to get a profit is to account for it in your purchase price. So if you have $800/mo. left over after you deduct 50% from the gross income, subtract $100/unit for your profit. Then you have $700/mo. for the P&I. Reasearch various lending sources to find out the terms that will buy the property for $700. You can practice this on actual properties in your area. Just be aware that the numbers the owner or agent gives you may differ from the actual numbers. It doesn’t matter. Just run the numbers and they’ll tell you DEAL OR NO DEAL! Good luck.

3

Would the 50/50 rule apply if the exterior of the home is the responsibility of the homeowners association?

For example:

  1. Rents rent are $1400 per month.
  2. You have 100 unit townhome community.
  3. You pay $55 per month HOA.
  4. Taxes are $840/yr.
  5. Insurance is $480/per.

It seems with the 50/50 rule, $700 a month or $8400 per year is a lot for appliances, carpet and maintenance/repair. Is their another rule that applies to this situation?

P.S. - I am aware that I am part of the association. So knowing the financials of an HOA before purchasing is critical.

THanks…

4

The exterior does not require much in terms of maintenance unless its a painted exterior. The more frequent expenses are on the inside. Plumbing, electrical, appliances, carpet, etc… But when it’s all said and done, I think the 50/50 rule should still be used. It covers every expense the property requires with 50%. You can slice it any way you want, but the expenses will usually add up to 50%. It may be 40% one yr. and 60% then next. Expenses are not just maintenance. It covers everything but the P&I of your mortgage and your profit. Just don’t spend the surplus when you have a yr. of low expenses. Just keep rolling it into the reserves for when you have a major repair. This way the property always pays for its own expenses… not you.