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ParticipantI haven’t looked lately, but I think it will be awhile before you start seeing $350k tract homes in Poway. I think Poway will always outperform MM, if for no other reason than the reputation of the school district.
ParticipantI haven’t looked lately, but I think it will be awhile before you start seeing $350k tract homes in Poway. I think Poway will always outperform MM, if for no other reason than the reputation of the school district.
ParticipantI haven’t looked lately, but I think it will be awhile before you start seeing $350k tract homes in Poway. I think Poway will always outperform MM, if for no other reason than the reputation of the school district.
ParticipantI haven’t looked lately, but I think it will be awhile before you start seeing $350k tract homes in Poway. I think Poway will always outperform MM, if for no other reason than the reputation of the school district.
Participantgn,
In your analysis, I noticed that you use a 10% down payment ($270k mortgage on a $300k purchase).
– Do investors typically use 10% when they do their analysis ?
– I thought lenders typically require a 30% down for an investment property, is that right ?I was approaching from an owner-user standpoint, hence the more agressive 90% financing.
But you’re right, an investor probably would be looking at a 70% loan-to-value ratio, although they may or may not be able to find a lender that would go 75% 80%. They’d probably also be looking at a slightly higher mortgage interest rate as well.
Besides that, most lenders would require a debt service coverage ratio of at least 110%, meaning the net income would have to be 10% higher than the mortgage payment. That’s why SFRs typically don’t sell as rentals in this region – the buyers usually have to lie about occupancy to get the better terms.
Participantgn,
In your analysis, I noticed that you use a 10% down payment ($270k mortgage on a $300k purchase).
– Do investors typically use 10% when they do their analysis ?
– I thought lenders typically require a 30% down for an investment property, is that right ?I was approaching from an owner-user standpoint, hence the more agressive 90% financing.
But you’re right, an investor probably would be looking at a 70% loan-to-value ratio, although they may or may not be able to find a lender that would go 75% 80%. They’d probably also be looking at a slightly higher mortgage interest rate as well.
Besides that, most lenders would require a debt service coverage ratio of at least 110%, meaning the net income would have to be 10% higher than the mortgage payment. That’s why SFRs typically don’t sell as rentals in this region – the buyers usually have to lie about occupancy to get the better terms.
Participantgn,
In your analysis, I noticed that you use a 10% down payment ($270k mortgage on a $300k purchase).
– Do investors typically use 10% when they do their analysis ?
– I thought lenders typically require a 30% down for an investment property, is that right ?I was approaching from an owner-user standpoint, hence the more agressive 90% financing.
But you’re right, an investor probably would be looking at a 70% loan-to-value ratio, although they may or may not be able to find a lender that would go 75% 80%. They’d probably also be looking at a slightly higher mortgage interest rate as well.
Besides that, most lenders would require a debt service coverage ratio of at least 110%, meaning the net income would have to be 10% higher than the mortgage payment. That’s why SFRs typically don’t sell as rentals in this region – the buyers usually have to lie about occupancy to get the better terms.
Participantgn,
In your analysis, I noticed that you use a 10% down payment ($270k mortgage on a $300k purchase).
– Do investors typically use 10% when they do their analysis ?
– I thought lenders typically require a 30% down for an investment property, is that right ?I was approaching from an owner-user standpoint, hence the more agressive 90% financing.
But you’re right, an investor probably would be looking at a 70% loan-to-value ratio, although they may or may not be able to find a lender that would go 75% 80%. They’d probably also be looking at a slightly higher mortgage interest rate as well.
Besides that, most lenders would require a debt service coverage ratio of at least 110%, meaning the net income would have to be 10% higher than the mortgage payment. That’s why SFRs typically don’t sell as rentals in this region – the buyers usually have to lie about occupancy to get the better terms.
Participantgn,
In your analysis, I noticed that you use a 10% down payment ($270k mortgage on a $300k purchase).
– Do investors typically use 10% when they do their analysis ?
– I thought lenders typically require a 30% down for an investment property, is that right ?I was approaching from an owner-user standpoint, hence the more agressive 90% financing.
But you’re right, an investor probably would be looking at a 70% loan-to-value ratio, although they may or may not be able to find a lender that would go 75% 80%. They’d probably also be looking at a slightly higher mortgage interest rate as well.
Besides that, most lenders would require a debt service coverage ratio of at least 110%, meaning the net income would have to be 10% higher than the mortgage payment. That’s why SFRs typically don’t sell as rentals in this region – the buyers usually have to lie about occupancy to get the better terms.
ParticipantI do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.
The ratios are actually higher for single family residences because of the economy of scale thing.
Check it out: MM home rents for $2000/month and is assessed at $300,000:
Annual rents = $24,000
$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.At 7.5% for the mortgage the combined annual negative would run about $5,500/year.
ParticipantI do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.
The ratios are actually higher for single family residences because of the economy of scale thing.
Check it out: MM home rents for $2000/month and is assessed at $300,000:
Annual rents = $24,000
$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.At 7.5% for the mortgage the combined annual negative would run about $5,500/year.
ParticipantI do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.
The ratios are actually higher for single family residences because of the economy of scale thing.
Check it out: MM home rents for $2000/month and is assessed at $300,000:
Annual rents = $24,000
$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.At 7.5% for the mortgage the combined annual negative would run about $5,500/year.
ParticipantI do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.
The ratios are actually higher for single family residences because of the economy of scale thing.
Check it out: MM home rents for $2000/month and is assessed at $300,000:
Annual rents = $24,000
$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.At 7.5% for the mortgage the combined annual negative would run about $5,500/year.
ParticipantI do a lot of income/expense analysis of income properties. Right now, property taxes (alone) are eating up 10% or more of the rents right off the bat. Add insurance, administrative (banking, accounting, tax prep, etc) expenses, maintenance costs, etc, and the real expense load starts at 30% and goes up from there. If you add in a total of two months vacancy or collection loss over an average 7-year holding period that adds up, too.
The ratios are actually higher for single family residences because of the economy of scale thing.
Check it out: MM home rents for $2000/month and is assessed at $300,000:
Annual rents = $24,000
$3,300 for taxes
$1,100 for insurance
$ 800 for administrative
$ 800 for annual repairs/maintenance
$1,000 for annual budget for painting, flooring, etc.
———
$7,000 in expenses
$20,368 for the mortgage payment ($270k Mtg @ 6.5%)
———
$27,368 in outlays
-24,000 in rents
———
-$3,368 in negative cash flow, not counting tax benefits if there are any. This is a best case scenario. That’s if the house never sits vacant for a single month and never has any big repair items. It assumes that you will do new paint and carpet every five years, which is stretching it if your tenants move every year.At 7.5% for the mortgage the combined annual negative would run about $5,500/year.
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