Monday, November 3, 2008

A cool website for you potential RE investors

I ran across this website several months ago and then forgot about it. Tonight while searching an address I ran across it again. It's called and it analyzes properties based on rental value. Basically you type in an address and it tells you what you need to pay for it based on average rents of comparable homes in the area. It's pretty cool although it uses only numbers to calculate the data. It doesn't know if a home is up in a glitzy area on a hill or in a ghetto behind a sewage treatment plant. So your results may vary depending on what you are looking at.

I typed in that house in "The Retreat" from the last post and got this.

Investment Summary

This investment summary assumes a 30-year fixed loan, 20% down, 7% APR. It uses operating assumptions of 10% management fees, 9% vacancy allotment, 3% repairs. This investment summary assumes that rents increase each year by 5%. This property would need to be purchased for $267,520 in order to generate a break-even cashflow based on prevaliing market rents.

1 Year 2 Year 3 Year 4 Year 5 Year
Break-even Purchase Price $267,520
Cashflow Before Taxes
Cash-on-Cash Return

The above purchase amount is based on a rent of $2095/mo. That is the average for homes it used as comparables. I think this home would rent higher. The high rental value in the comparables was $2900/mo. I'm not sure if you could get that or not but if you could fetch that kind of rent then this home would be priced about right. Using the asking price, the numbers come out similar to those above when the rent is $2900/mo and the purchase price is $380k.


1 Year 2 Year 3 Year 4 Year 5 Year
Net Operating Income
Debt Service

Cashflow Before Taxes

I don't totally agree with their assumption that rents will increase 5% per year however. I think rents are more likely to go the other direction in the near future. Those numbers look great but only if the rents go up. If they go down or stay flat then you start to bleed red ink.

The site is cool and offers a wealth of information. Some of it good and some fairly useless. But it does offer a glimse into the probable future of prices. Chances are they will fall to, or close to comparable rental values.

1 comment:

Martin Burtin said...

Might factor about 3% rent increase, not 5%. You will loose good renters if you piss them off. Or, they will beat you up with maintainence items, figuring you owe them. I often forgo rent increases to renters who maintain their place and don't bug me.