Runnig The Numbers-seing If You Got A Good Deal
Yes looking at propeties is free, but for me running numbers is a nightmare, one that I've got no clue how to do correctly!! It seems that 1st. you must know your loan amount plus interest, 2nd your rent, 3rd. your expenses(which is what ???) and then there is everything else too. Can someone help me on this matter or direct me to a good book that that will teach me this proccess?? 
It seems that a lot people are looking but nobodys helping me on this issue, please is not running the numbers "the" most important part of investing?????
There must be something on it somewhere,right?
Buy It, Fix It, Sell it! Is a good book you could start out reading. I cannot remember the author but I found it in Books A Million. You do need to know the numbers game though, it is the Second most important part to investing. If you don't know that a 100k house selling for 65k needs 40k worth of repairs is a bad deal then you are bound to get burned.
100-65-40= -5k and that is just repairs not electric,water, marketing, holding, ect... Learn the game, then the numbers, then the market. Go in that order. You have to know the game before you do anything. You have to know the numbers before the market will make sense. Hope this helps and I will clarify more if you need me too.
Jim
Thanks Killenjw
I believe the numbers you gave are more common sense numbers, but to buy to hold,rent and sell in 5yrs those numbers won't work. I need to learn the ROI, the amount of cashflow to me each month,year, etc..
And I am looking into what those numbers are exactly, that goes into the formula to decide to buy or pass?? Yes I have some of them but , they vary so much how does one know when and why they vary, and not just differnt prices for different properties, thats obvious.
Is this asking too much or is there an answer out there??? but still thaks for your answer,really.[ Edited by pktd1072 on Date 02/22/2004 ]
Scratch fix it buy it sell it. You need a landlording book. I have read Secrets of a Millionaire Landlord also. Another good one.
4/2 2000sqft decent neighborhood (North Carolina)
Purchase price- 100k
No equity-
Mortgage- 800
Fair rental price for house is about 925
Your cash flow a month is $125
Your tennants pay for everything associated with everyday living. If the furnace goes out you are out 3k and now have a negetive cash flow for about 2 years (approx). You have to decide the risk involved with holding rentals yourself noone can answer that for you. I can tell you that there are safety in numbers but that can also hurt you if you have 3 furnaces go out at one time and you own 5 properties. Then you are out for a while. I am not sure if that came out right but you get my drift I am sure.
Jim
This is a simple process if you learn how to do it correctly. Start from the beginning:
#1- Purchase Price- write down what you
are going to offer.
#2- Acquisition cost-what is your loan
going to cost you?
#3- Rehab Cost- What will the rehab
cost you. Add 10% for extra's
#4- Carrying cost- 6 month's worth. You
will have houses fall out of escrow!
This is a good insurance policy. If
it sells faster, more profit for you.
#5- Sales cost- 9-10%. A lot of investors
dont realize the "true" cost. Things
like FHA non-allowables, termite,
home-warranty, title, escrow, misc
repairs called out my home inspec
tor, God I hate those guys!
Add it all up. If the profit you were anticipating is not on track, you can back
up your purchase price.
This is based on buying a house from a bank, putting new financing on it and selling it to a new owner obtaining their own financing. No lease option.
Best Riches,
Jeff Adam
_________________
"The only place success comes before work
is in the dictionary."[ Edited by JeffreyAdam on Date 02/22/2004 ]
Go to my TCI at the top of the page. When you get to the My TCI page, click on "tools", then look under where it says calculators and click on "Pro-forminator". This is a good tool for calculating your expenses and running the numbers to see if you'll make money on your rental.
You might find more insight in the Landlord Forum. If you are running the numbers on a property you want to hold for a rental look for topics that discuss Debt coverage Ratio, Internal Rate of Return and their relation to cash flow.
Tools and landlord forum two great ideas thank you very much, I will figure this out sooner or later, hopefully sooner.