Comments on: House #4: Rental Analysis

By: J Scott

J Scott — Fri, 31 Oct 2008 21:01:39 +0000

Andres -

You’re absolutely right. Since I haven’t used PM for any properties yet, I don’t know the “real costs”. But, because of the pricing structure of good PMs, it’s probably closer to 12-15% (the higher the turnover, the more it will be).

I’ll have to increase that in my calculations from now on…

By: J Scott

J Scott — Fri, 31 Oct 2008 20:59:44 +0000

Thanks RealOG!

What I call the the “ROI” above is actually the “Cash On Cash” return. I made a mistake when writing this, and meant to call it the cash-on-cash instead.

Generally, I factor the tax benefits and the equity accrual (the paydown by my renters) into the “total return,” which is the 14% number.

As you point out, that’s the important number in the end, because it’s my total ROI.

Thanks for catching this!

By: RealOG

RealOG — Fri, 31 Oct 2008 17:00:18 +0000

Your ROI calculations appear to have left out principal reduction. If you get an amortizing loan, that paydown of principal will add to your return (more the longer you hold the property).

Love your blog, bro!

By: Andres

Andres — Fri, 31 Oct 2008 15:08:31 +0000

Most of the pm companies I’ve dealt with want to charge you a full month of rent for finding, screening and getting the lease with the renter. If this is the same in your area (I’ve seen this happening in every area I’ve looked into) then your PM costs are higher.

The good PMs want that arraignment as that is how they make the big bucks.

Have you seen any other setup?