# Mobile Investor Application FAQ This is a beta release of the mobile version of the investor application. If you have any feedback or questions, please drop us an email at: <a href="mailto:support@LasVegasRealEstateInvestmentGroup.com?Subject=Support" target="_top"> support@LasVegasRealEstateInvestmentGroup.com</a>. We will do our best to get back to you as soon as we can. # Break Even Estimator FAQ Please check out the topics below. If you do not see the answer to your question or if you have feedback or suggestions, please drop us an email at: support@Las vegasRealEstateInvestmenGroup.com. We will do our best to get back to you as soon as we can. Also, we are in the process of releasing more tools and possibly a book on investing. If you would like to be notified, or receive our bi-weekly Las Vegas Investment newsletter, please <a href="http://www.lasvegasrealestateinvestmentgroup.com/newsletter_signup.html"> sign up </a> for that as well. ## What problem does this tool solve? Suppose you come across a property that you think might be a good investment. However, before you spend the due-diligence time to really investigate it you need to make a quick decision whether it has a chance of generating the profit you require. This estimator provides the quick answer you need. The estimator requires the estimated monthly rent, monthly fees, your profit goal and some other constants. Once you enter these you can instantly get the break-even price. This is the purchase price where recurring income equals recurring expenses. For example, suppose the estimated break even price is $180,000. If you think you can buy the property for $160,000, it is worth considering. If you think you would have to pay $200,000, forget that property. I use this tool all the time to evaluate properties for my clients. ## How do I use it? Check out the following video to see how to use the estimator.<br> <iframe id="helpVideo" src="http://player.vimeo.com/video/105409118" width="250" height="440" frameborder="0" allowfullscreen></iframe> ## Why isn't there an input field for rehab cost? This tool only considers recurring costs, not one-time costs like rehab, closing costs, etc. The tool is only for a quick go/no-go decision on whether the property has a chance of meeting your profit goals. ## What if I want to include a vacancy provision or maintenance cost? You could reduce the rent to account for this. For example, if you choose to assume an 8% vacancy rate, you could reduce the monthly rent as follows: Gross monthly rent: $1,200 Vacancy rate: 8% Adjusted monthly rent: $1,200 x (1-.08) = $1,104/Mo. However, in my real estate practice I do not usually consider vacancy rate with single family properties for the following reasons: * Unlike a multi-family property, a single-family property is either rented or it is vacant. It is 100% occupied or 0% occupied. * Tenants tend to stay in the properties that we select for our clients for more than 2 years. * The time to rent the properties that we select and make market ready is typically under two weeks. So, if you are considering properties that take a long time to rent and you do need to account for vacancy rates, perhaps you are considering the wrong properties or the wrong market. ## What does the percentage of the tax rate refer to? It refers to what percentage of the purchase price would the real estate tax be. For example, if the annual tax on a $300,000 property is $2456, then the tax rate would be $2456/$300,000 = 0.8%. You would then enter 0.8 in the tool. ## How can I determine a simple percentage for the tax rate? Go to one of the public real estate sites (such as Zillow) and look at recent sales of similar properties. Divide the sum of annual taxes by the sum of the sale prices. Below is an example: | Sale Price | Annual Taxes | | :--: | :--: | | 349000 | 2187 | | 375000 | 2257 | | 319000 | 2269 | | 349000 | 2284 | | 300000 | 2347 | | 300000 | 2456 | | 314999 | 2456 | | 350000 | 2499 | | 369500 | 2545 | | 330000 | 2557 | Sum of Sale Price: 3356499 Sum of taxes: 23857 Average taxes: 23857/3356499 = .7% ## How is the break-even price determined? The formula is: <!-- 1 = \frac{RecurringRent}{RecurringExpenses} --> ![](breakEvenFormula0.png) Expanding this a bit: <!-- 1 = \frac{EstimatedRent}{DebtService + RealEstateTax + Insurance + Profit + Management + Fees} --> ![](breakEvenFormula1.png) This sort of problem can not be easily solved because the variables have interdependencies. For example: Management and Profit are dependant on EstimatedRent. And, DebtService and RealEstateTax are dependant on the purchase price. So, solving this type of problem requires a bit of computing which is what the estimator does for you. ## What about cash transactions? This tool does not apply to cash transactions. Cash transactions will be handled by a seperate tool to be released in the future. If you would like to be notified when it is released, please <a href="http://www.lasvegasrealestateinvestmentgroup.com/newsletter_signup.html"> sign up with our investor newsletter.</a> ## My question is not answered here. Please send to us at <a href="mailto:support@LasVegasRealEstateInvestmentGroup.com?Subject=Support" target="_top"> support@LasVegasRealEstateInvestmentGroup.com</a>. We will do our best to get back to you quickly. <p style="font-family: Sans-Serif;font-size:10">&copy; 2014 Eric Fernwood, All rights reserved. EricFernwood@gmail.com, 702-358-8884</p>