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SFR Investment Valuation Model


Typical analysis considers the following expenses of which some can be variable based on the age, location, and quality of home with the amenities it offers. These general expenses are a typical part of every investors calculations:

1. Taxes                         Note: If a HOA (Homeowners Association) is involved, some of these fees could be included

2. Insurance                            Sometimes a utility or insurance may be included, so do your due diligence to under-

3. Maintenance                         your true Net figure.

4. Management

5. Vacancy

You will generally see these across the top of a spreadsheet along with age, br/ba, sf, occupancy, address, zip code, county, PIN, among other categories of information. The more comprehensive the database, the easier it is to use to analyze the details using several metrics. 

Take a few minutes when looking into an area/city that you want to invest in. I use Wikipedia for a quick reference to review the demographics; employment, population, and trends. Get familiar with it and when interviewing your management, it would be good that they are aware of what is happening in the big picture as well as the day to day operations.

Measuring the returns:

Take your monthly rental $600.00 X 12 = $7,200 total income (1 hm. typical 2 or 3 bedroom depending on area)

Subtract Expenses:

Taxes             $750.00                                                    Net Income   $4,420.00 /.10 (10%) =$44,200.00 Price

Insurance         350.00                                                    Net Income   $4,200.00/.15 (15%) =$29,467.00 Price

Mngmnt 10%     720.00                                                    Use the figures above as your cash on cash return.

Maint. 5%         360.00                                                    You will also benefit from tax deferred depreciation

Vacancy(1 mn ) 600.00                                                    not noted here. 

_____________________                                                 Divide your total investment amount by the price that will

Total             $2,780.00           Net Income = $4,420.00     give you the return you are looking for.

                                                                                     You may run into markets where there are more buyers 

                                                                                      at that rate and the prices will be going up. That is what 

                                                                                       happens with every popular investment and a good reas-

                                                                                       on to quietly assemble as much as you need up front be-

                                                                                       fore a good thing is gone.

Ronald R Stewart, Commercial Broker, FL /IL/IN/WI  |  Illinois Commercial  |  Buying  |  Selling  |  Land Developments  |  Analyzing Retail   |  American Energy  |  IRA : Real Estate or Stock ?   |  Contact Us  |  Calculators  |  Apartment Analysis  |  SFR  Investment Analysis  |  Hard Money / Private Equity  |  Off Market Deals, Temporary Availability  |  IRA- Real Estate or Stocks?  |  Note Purchasing  |  Investment Funds / Equity Positions  |  13% return or purchase for pennies on the dollar!
 
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