Crunching The Numbers

This past weekend I started looking for a new place to live, even eyeballed some properties to purchase but I am always hesitant to buy something for myself to live in, to much commitment.  These current generations are such commitmentphobs and I love it because I believe there is a profit to be made.  If someone lacks the gumption and commitment it takes to purchase a home it doesn’t negate the fact that they need a place to live, thus brings about the rental.

When I eyeball properties that I have an interest in purchasing I like to have a formula to put them in to see if I should walk inside.  The attached spreadsheet was found on biggerpockets.com and was created by blogger J Scott.  What it shows you is how much profit you can expect to make on a Single Family Home in a given situation.  All you need to do is insert the purchase price and it will adjust the outcome.  The numbers in red are important because you probably will have to change them based on your city and state.  This makes you take into account insurance, property taxes, vacancy, etc.  You can answer a lot of the questions from the MLS sheet a Realtor will give you.  Again this is only for a single family home. 

I suggest for fun that you drive around your neighborhood and see what’s for sale.  Take what numbers you see and plug them in.  Maybe there is a potential gold mine in your neighborhood, especially if you are in a city with low property taxes! 

http://www.biggerpockets.com/files/user/JasonScott/file/20-sfh-rental-analysis    (you will have to create an account to download, but if you want me to email it to you send me your address!)