One view is that an 8.5% gross yield leaves enough room for surprises; the other is that Los Angeles insurance and financing can wipe out that margin quickly. I’m trying to work out which view fits a 1-bed villa priced at $870,000 with estimated rent of $6,179 a month.
My cash-flow model covers vacancies, management, normal upkeep, tenant changes and money set aside for a substantial repair. The structure looks sound, but I do not yet have a dependable insurance figure. Property tax and the cost of debt also need testing against a lower-rent scenario—for example, one turnover period combined with an unexpected maintenance bill.
Which assumption would you verify first? My practical compromise would be to proceed only if firm insurance and financing figures still leave worthwhile monthly cash flow, rather than relying on the gross percentage.
My cash-flow model covers vacancies, management, normal upkeep, tenant changes and money set aside for a substantial repair. The structure looks sound, but I do not yet have a dependable insurance figure. Property tax and the cost of debt also need testing against a lower-rent scenario—for example, one turnover period combined with an unexpected maintenance bill.
Which assumption would you verify first? My practical compromise would be to proceed only if firm insurance and financing figures still leave worthwhile monthly cash flow, rather than relying on the gross percentage.