by Linda Pliagas, Publisher
Once again I start the day sifting through hundreds of emails from Brokers, turn-key providers, wholesalers, private lenders, industry speakers, and other professionals.
It didn’t take long before I came across yet another example of the reason I have been telling our investors: LOOK AT THE NUMBERS…CAREFULLY.
This particular turn-key company, who is popularly known in the industry, was marketing two cash flow properties to long-distance landlords.
To my disappointment, once again, the numbers touting cash flow were not accurate at all… missing were critical figures: Vacancy Factor, Maintenance Costs, and Reserves.
This is how the Cash Flow Analysis was stated:
Rental Income MINUS:
* Property Tax
* Property Management
= EQUAL CA$H FLOW
A cash flow analysis like this is simply not accurate. Unfortunately, not having proper figures can set up investors for financial trouble! It’s crucial for investors to also add on other expenses — typical costs that are just a part of routine business for landlords.
These true figures are missing from the above example, and regrettably have been missing in many cash flow analysis’ property profiles that I’m seeing distributed to investors on a mass scale.
It is truly causing such panic that I will be dedicating a lot of articles, event presentations, and podcasts to this topic.
While attending real estate classes at Santa Monica College decades ago, I was taught a crucial acronym for investors to memorize when analyzing rental properties: TIMMUR
TIMMUR will save your tuchus…
T – Taxes
I – Insurance
M – Management
M – Maintenance
U – Utilities
R – Reserve (Vacancy Factor)
In a previous article, I wrote more in detail about vacancy factor and how to calculate projected maintenance costs, CLICK HERE.
My goal with this new post is to once again warn investors to please calculate your cash flow correctly. As a regular reader, you should know better than to accept inaccurate numbers.
The reason proper analysis is so important of a topic for our reader is because many property profiles that I’ve seen distributed via email are not giving a true picture of life as a landlord.
You will have vacancies, repairs, and unexpected costs when you purchase a rental property.
Also, during the management of your property, tenants will leave; cash flow will be lost while the property is made rent-ready again.
Remember to always calculate with TIMMUR: Taxes, Insurance, Management, Maintenance, Utilities, and Reserve… for vacancies, and make-ready costs.
I hope this helps our readers determine proper cash flow before buying a property for their rental portfolio. It is my hope, and everyone who contributes to our publications and events, that you become and remain successful as a real estate investor.
Should you have any questions, concerns or comments, please call our office at: 805.693.1497 or reach out via text at 310.994.1962. Due to the overwhelming number of emails we receive daily, we now prefer to be contacted by phone. Happy safe investing.