Author Topic: Help Evaluating this Property  (Read 1353 times)

NonprofitER

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Help Evaluating this Property
« on: September 08, 2014, 08:11:27 AM »
Hi all,

We've been looking at getting our first rental property and have primarily been looking at suburb communities outside of Austin/ San Antonio, TX.  A family member who lives in a town (population ~7,000 and growing) about 40 minutes outside of Austin sent us a combined commercial/ residential listing to evaluate.  The town is projected to grow over the next 20 year.  Median income of $50,000 for families, less than 10% under poverty line, increasing businesses moving to the area.  What else should I know about it?

It's a historic multi-level property with 3000ish square feet right off the central town square.  Downstairs is leased to a fitness business that brings in $1050/mo.  Upstairs is a private entry 1 bedroom/ 1 bathroom property w/ washer/dryer connections, full kitchen, etc.  It's unleased, needs at least cosmetic improvements, but is touted to be able to bring in $850/mo. 

Listing is $200,000 (which doesn't seem that great) except that my family member believes it has been on the market for a while and could be negotiated for far less.  I don't have any info yet on cap rate, etc.

Since we're relatively new to the concept of investment properties, and have only been researching SF's, we don't know how to evaluate this appropriately.  Our initial questions are:
1) How long is the current lease on the fitness business
2) What does the market suggest comps are, etc.
3) Rental history of upstairs unit?

Taxes are low - roughly $2500/yr. 
The units don't have central air, which seems like a red flag in TX, but not sure how that would be changed in a historic property.  Because its historic, I suspect there may be limitations on changes made to it? 

We're in super initial overview stages here and not looking to make any rash moves.  Just need help conceptualizing how to evaluate it.  If we could get the property for $150,000 or even less with cash, then it might have good cashflow potential and would meet the 1 - 2% rule.... but we want to make sure we're asking the right questions. 

skunkfunk

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Re: Help Evaluating this Property
« Reply #1 on: September 08, 2014, 08:27:50 AM »
Make sure to take a good look. There might be a reason they can't rent the upstairs unit, and furthermore reasons that they are trying to sell it.

Captain and Mrs Slow

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Re: Help Evaluating this Property
« Reply #2 on: September 08, 2014, 08:47:08 AM »
Pardon any strange thpos as I'm doing this on mobile and not on the app (couldn't get it working right) but at the moment there is another thread going on the same subject Reader Case Study Proceed with 4th house closing, a lot of discussion about the numbers. I'll refrain from that aspect of it as I don't live in America. But I own real estate (germany) have family and friends that own real estate.

[urlhttp://forum.mrmoneymustache.com/real-estate-and-landlording/reader-case-study-proceed-with-closing-on-4th-rental-property/][/url]

So few general thoughts

1. Real Estate is very hands on my sister in law owns a triplex, tennat gave notice and she just spent 8 hours over a weekend cleaning!

2. Watch for grand fathering, same triplex, owner died and wife didn't want to manage it anymore, day after closing the city showed up with a shopping list of upgrades that needed to be done. Then the boiler went

3 Maintence even though our German properties tenants pay for a portion of the condo fees I'm responsible for repairs, our tenants moved out and we had to put 5000 (boiler, tub refinishing etc) in repairs before the new tenant moved in. Huge pain in the ass as we live 5 hours away.

4. Know the law we all assume things only to find out later it's not true.

5. Make sure it's at least cash flow even, a lot of people buy places where they lose money, remember tenants move out.

6. The nicer the place the better the tenant - SIL says husband keeps complaining about her wanting to fix the place up, who cares if the door knobs don't match, a lot of money later the new tenant commented how nice the place was, within a couple of days they had three really good people put in applications, oh yes they raised the rent a lot!!!!

7. Real Estate is about location location location.

8. It's a long term play 10-20 years

Finally talk to other landlords about their experiences,mand you may want to surf over to Financial Samarai, he makes around 60 grand a year in rental property and has written extensively (search rental property under about)

Good luck
« Last Edit: September 08, 2014, 08:50:55 AM by Captain and Mrs Slow »