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To get a cap rate, you must know expenses, and that is not just taxes, insurance, and debt service!
cap rate and COC numbers.
For quick evaluations, you can use the 50% rule which states that 50% of your gross rent will go towards expenses (operating, capital, and vacany). The balance 50% will go to debt service and cash flow.
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So, at $1400 gross, after expenses, you are at $700 monthly to cover debt service and cash flow. With $140k in debt, you are not left with a whole lot of cash flow, so where did you get 8.3% cap rate?Be careful. The sellers cash flow could have been great all these years because they never fixed anything. First off, $100 a month for repairs is fairly low. Over the long haul, you will incur at least 10% of your gross rents in repairs which in this instance would be $140 monthly. You also did not include accountanting costs, legal fees, evictions, capital expenses, advertising, tenant placement fees, management fees (even if you manage yourself, you still have to pay yourself for your time).
So your gross monthly rent is about 1% of the acquisition price which only means that the income can support PITI and nothing much more above that. To get actual cash flow, you need to be at 1.5% or better at those acqusition prices to get real cash flow which makes me wonder how you came up with the Nike Womens Shorts Black
This is a buy and hold, not a flip. Without taking the roof replacement cost into consideration, my initial calculation of cap rate Nike Shorts Running is 8.3% and cash on cash is about 8.9% for this property. Since I new to real state investement, I wonder what would be the ideal return normally for a buy and hold strategy. I located in Minnesota. Houses I looking at are typical rambler built in 1950 65 with 3 to 4 bedrooms and 1.5 bath, price range is from $130K to $160K. Thanks again,
should I withdraw my offer
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I'm new to the forum. I have a question regarding an offer I made yesterday. I offered to a real estate investment property last night. The owner accepted my offer but they didn have the property disclosure available when I sent my offer. I just received the property disclosure today. I notice the age of the roof is 18 years old, and no repair or replacement work was done since 1994. I feel like the roof is reaching the end of life. I was under the assumption that the roof doesn need to replace soon when I offered. So the owner is telling me although the roof is 18 years old but nothing is wrong with it, and they stand firm with the price. From a real estate investment standpoint, should I withdraw my offer due to the potential roof replacement cost? Thanks,Is this a flip, or a buy and hold? If a flip, and the roof has good appearance, and after your roof inspection, needs no repairs, I would not worry about it. If a buy and hold, I would have concern as you will run into some capital expenses sooner rather than later. To account for that, you either need to have awesome cash flow, or get the price lower to account for said future costs (or get a deferred maintenance credit from the seller)Guys, thanks for your prompt replies.
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