I’ve been reasearching for a while and believe I found something that works for me.
Know the area well. Desirable school district. Less than a mile to shopping. Less than 4 miles to major highways. Rentals are strong.
Current 34 rentals (min 2 bed/2bth). Starting at $1350(just a couple) with 4beds starting at 1800)a couple at $1600). Neighboring zip has 22 rentals with same numbers.
Townhouse: 4/3/1; asking $200k; $2900 taxes; $35 insurance; short sale.
Planning to take $50k($40down, $5-6 closing) fixed equity 4.99/20yrs ($330).
Mike’s formula is 50-50. Half for the PI and half for everything else. That would put the rent at $1646 which is at least a $100 less than starting price for 4/3.
It is early in the morning, but I’ve read your post 3 times and still find i confusing.
Why not just post the basic numbers for the best deal (out of the 34) you can find:
Gross Rents?
Purchase Price?
Rehab Needed?
In addition, I have just a couple of general comments. First, I don’t buy anything that has HOA fees. Anytime you have a HOA, you run the risk that they will raise the HOA fees or, even worse, declare a special assessment and soak you for thousands of dollars. Also, I don’t think that you can get 4.99% for a NOO (non-owner occupied) property.
Mike's formula is 50-50. Half for the PI and half for everything else. That would put the rent at $1646 which is at least a $100 less than starting price for 4/3.
The 50% Rule says that throughout the United States, operating expenses run 45% to 50% of the gross rents. In other words, half of the gross rents go to operating expenses (not PI). The remaining half goes to your mortgage payment and any cash flow you will have. That is significantly different than what you said.
First, I like to address the confusion. Sorry about that Mike.
This is the deal in simple terms.
Townhouse: 4/3/1; asking $200k; $2900 taxes; $35 insurance; $85 HOA; short sale.
$823(PI)+$245(tax)+$35(insur)+$85(HOA)+$330(equity)= $1218
Planning to take $50k($40down, $5-6 closing) fixed equity on my “primary residence” 4.99/20yrs ($330).
The other info was a poor effort to explain the rental market in the area. There are currently 56 rentals (nothing to do with RE for sale). The majority of 4/3s are going for $1800 and up.
With Mike’s clarification, PI plus cash flow (say $100) is $923. The rent would need to be $1846. I would then have $923 for operating expenses. Known expenses are tax(245), insur(35), HOA (80) and equity loan(330) for a total of $690. This leaves $233 for other expenses including maintenance, vacancy and what else should I include.
In regards to HOA, so far all TH subdivisions have them, unfortunately. To avoid HOA, need to purchase SF.
In regards to the part of the country, I’m in Northern Virginia. Any specific info I can get from other Northern Virginia members would be greatly appreciated.