I typed in that house in "The Retreat" from the last post and got this.
Investment Summary
This investment summary assumes a 30-year fixed loan, 20% down, 7% APR. It uses operating assumptions of 10% management fees, 9% vacancy allotment, 3% repairs. This investment summary assumes that rents increase each year by 5%. This property would need to be purchased for $267,520 in order to generate a break-even cashflow based on prevaliing market rents.
| 1 Year | 2 Year | 3 Year | 4 Year | 5 Year | |
|---|---|---|---|---|---|
| Break-even Purchase Price | $267,520 | ||||
| Rents | $25,140 | $28,332 | $34,131 | $36,251 | $38,773 |
| Cashflow Before Taxes | $-2,238 | $252 | $4,776 | $6,429 | $8,397 |
| Cash-on-Cash Return | -4.18% | 0.47% | 8.93% | 12.02% | 15.69% |
The above purchase amount is based on a rent of $2095/mo. That is the average for homes it used as comparables. I think this home would rent higher. The high rental value in the comparables was $2900/mo. I'm not sure if you could get that or not but if you could fetch that kind of rent then this home would be priced about right. Using the asking price, the numbers come out similar to those above when the rent is $2900/mo and the purchase price is $380k.
Cashflow
| 1 Year | 2 Year | 3 Year | 4 Year | 5 Year | |
|---|---|---|---|---|---|
| Net Operating Income | $20,384 | $25,080 | $30,588 | $37,049 | $44,628 |
| Debt Service | ($24,264) | ($24,264) | ($24,264) | ($24,264) | ($24,264) |
| Cashflow Before Taxes | $-3,880 | $816 | $6,324 | $12,785 | $20,364 |
I don't totally agree with their assumption that rents will increase 5% per year however. I think rents are more likely to go the other direction in the near future. Those numbers look great but only if the rents go up. If they go down or stay flat then you start to bleed red ink.
The site is cool and offers a wealth of information. Some of it good and some fairly useless. But it does offer a glimse into the probable future of prices. Chances are they will fall to, or close to comparable rental values.