Rental Property Evaluation

[BallardStubble]

Property Type: SFH
Asking Price: $90,000 (slightly less than market value)
Gross Rents: $10,800 (not accounting for vacancy, so $9,720, assuming 10%)
Property Taxes: $876
DP = 20% or 18k
Mortgage: 72k
Mortgage payment including taxes and property insurance: $422.87

What more information is needed here? I'd plan on being the landlord, so no property management fees.

[not_a_trex]

WIll you be paying closing costs (assuming yes)? Is that calculated into the asking price?

Have you done an inspection on the property? What kind of repairs do you think you'll have to do to make the property "rentable"? How much are you saving for variable repairs that will happen due to wear and tear?

Some areas make the property owner responsible for utilities? Who is in charge of utilities on the property? Is it you or the renter? If it's you, are you going to bill the renter while you pay the utilities? Will you be paying a fee to charge the renter?

Do you have a budget for getting new tenants (eg advertising online, getting for rent signs, etc)? This can be $0. I assume they will pay an application fee for a background check et al.

[iamlindoro]

not_a_trex covered a lot of the missing stuff. Also missing insurance and costs for initial repairs.

There is nothing wrong with doing the property management duties yourself, but your budget should always be able to bear the cost.  If you get hit by a car tomorrow, what becomes of your family (present or future)? Do they have to take on the burden of being property managers, too?  What if you get a job offer across the country that you just can't turn down?

Using some average numbers for insurance ($700), initial repairs ($2,000 - assumes it is in very good shape indeed), and closing costs ($3,000), I get a Cash ROI of about 11.5%.  Using common PM and tenant placement costs, I get 5.1% Cash ROI.  My assessment is that this property is borderline if you do all the PM, and not worth it at all in the eventuality that you ever need someone else to do it.

Not to self-promote, but you may want to check out this sticky post for some linked tools that will help you analyze property and take into account most of the common (and commonly overlooked) costs:

http://forum.mrmoneymustache.com/real-estate-and-landlording/evaluating-a-rental-property/