Running The Numbers???
Well I am trying to find out the formula for finding out whether to buy or pass on properties for rental. I was directed to this forum to maybe find out? Does anyone have ideas about this subject, I will be waiting to hear from you proffessionals.
Check the forum already in progress
[addsig]
A formula? Flip a coin. Heads, you buy. Tails, you pass.
Come on! There is no formula. Formulae imply absolutes. There are no absolutes in this business. We each establish certain criteria, threshholds if you will, that help us determine whether a particular property should be added to our rental inventory.
Cash Flow, Appreciation, and Tax Benefits all play a role in the investor's decision making process. There are some quantifiable criteria for these factors, but your own instinct and subjective opinion should not be discounted.
There are over 400 topics already in this forum. Many of them discuss purchase criteria and how to use cash flow analysis to determine whether a particular property is a good financial investment as a rental.
You just have to do a little reading.
I've never heard anyone say that their cashflow was greater than they expected. On the other hand, there are many, many landlords out there that have ended up in negative cashflow situations. I would be extremely conservative on cashflow estimates. I personally use the simple formula of Gross Annual Rents x 5 to determine a maximum that I will pay. This may seem extreme to some but it has worked very well for me. You will probably have to do some rehab to get these numbers, but you can very likely do even better if you put your mind to it.