Monday, July 11, 2005

NOI for House #1

Instead of trying to decipher pages of financial info, I decided to just break down the monthly NOI and CF for House #1. These figures are a little misleading, because I have to still recoup some costs, and left out a bunch of information that will adjust the bottom-line tremendously. Suffice it to say I'll still be negative by year's end as far as cash: ($10,500), but I'll have approximately $30,000 in equity, so my bottom line will be around +$20k in networth.

Loan Balance: $104,000
Interest Rate: 4.875%(a)
Monthly Payment: $550.38

                           Rate      Monthly
                         ========  ===========
Potential Rent Income:       -      $ 1,100.00
Vacancy:                   0.000%   $     0.00
                                   -----------
Gross Operating Income:             $ 1,100.00

Real Estate Taxes:         2.354%   $   268.72
Property Insurance:          -      $    47.67
Property Management:       8.000%   $    88.00
Maintenance:               5.000%   $    55.00
HOA Dues:                    -      $    11.00
                                   -----------
Total Operating Expense:            $   470.39

                                   ===========
Net Operating Income:               $   629.61

Debt Service:              4.875%   $   550.38
                                   ===========
Cashflow (before taxes):            $    79.24


(a) The quoted 4.875% interest rate is the current P&I rate for the option ARM I got. I could also pay interest-only @3.125% (or $445.51/mo) or pay negative amortization @1.375% (or $352.72/mo). I will have to pay the 1.375% for the first payment, and subsequent payments will adjust based on the MTA rate. The 10yr history shows the MTA at a high of ~6.5% in the 1990's. The lender adds a margin of 1.5% to 2% to that amount depending on several factors. Since the rate is an average of an average, the potential for sudden spikes in rates is almost nonexistent - the increases (and decreases), if they occur, will reflect slowly over time.
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3 comments:

Steve said...

BTW, my wife and I are about 90% sure we'll be doing the PM ourselves. This will give us both better insight into interacting with our customer base. If it gets too overwhelming, I'll seek the help of a PM company, but I doubt any will really want to sign us up for only a few months. I also doubt the place will ever need any repairs between now and the end of the year, but one never knows. As such, I just left in the normal 5% repair costs.

Jul 11, 2005, 10:02:00 AM
Sellrealest8 said...

The numbers work here. And you said you wanted to do your own property management. Be sure to buy the book "Every Landlord's Legal Guide" by Marcia Stewart and Attorneys Ralph Warner & Janet Portman

It will be a huge asset to you.

Jul 11, 2005, 5:13:00 PM
Steve said...

Thanks for the comments all. As I said before, I left out a few things like skipping a mortgage payment while it goes through the refi, recovery costs, RE taxes, etc. The final +$20k networth at year's end will be about right, but even that will be muddied due to depreciation, write-offs, personal taxes, and so on. Guess I need to get hold of a CPA quick. ;-)

Jul 12, 2005, 5:45:00 AM

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