Just waiting for the Laker game, so thought I’d run a quick calculation:
For this property, assuming $800/mo., $100k, with $20k downpayment, 7.25% interest rate (which is the last interest rate I was given a few months ago):
Cash flow: -$262/mo.
Cash on Cash: -15.7%
ROE = 12%
Cap rate: 3.4%
Anyways, doesn’t look too terrific from these numbers. If you can push this rent to $1100 per month, then it breaks even. However, on this new amount, the Cash on Cash calculation would be 2.3%, which would still be under my standards.
Unless you are sure to get that $1100/month rent, assuming properties continue to go down in price, I would pass on this property. While condos/condo conversion prices lead the market, there may still be some more downside to the prices.
