Hi Folks,
I thought it would be interesting for those of you who haven't pulled the trigger yet to see a real-life deal and how it went down (initially). This was my first property. Here are the stats from my original post:
Original Analysis
Home:
3 Bedrooms - decent sizes
2 Bathrooms (there's really a third, but it's in the unfinished basement)
No Garage
Solid neighborhood with little-to-no crime
List Price: $80,000 (this is also ARV)
My Price: $73,500
Cash In:
Down Payment (25% to get a 4.625% conventional loan): $18375
Closing: $1400 (seller is paying an additional $1400 per the deal)
Immediate Repairs: $2500 (parts of the roof looked to be in rough shape to me, the home is already licensed as a rental though so it's mostly rent-ready)
Total Cash In: $22,275
Income/Expenses:
Rent: $1000 - confirmed this is reasonable with my PM and a couple others. Worst case scenario in my mind is $950 if it isn't renting...
Mortgage (P+I): $283.42
Taxes: $92
Insurance: $55
Vacancy: $83.33
Repairs and CapEx: $150 - the house is small, and having no garage I think will keep the repairs + CapEx at 13%, but I don't want to make that assumption without advice...
Management Fee: $75 - lease signing fee isn't included but I think I'm going to have us find the tenant. We know the property manager well enough and will work it out.
Cashflow: $261.25 ($3135/year)
Investment Numbers:
Cash-on-cash: 14.07%
Cap Rate: 8.44%
Actual Results
Home:
Price: $72500 - found some plumbing issues during inspection and we got $1000 off the price. Cost us $700 to fix.
Inspection: $325
Plumbing: $700
Other repairs: $600
Closing costs: $2000 - was a little more expensive than anticipated.
Cash In (25% Down): $21,750
Income/Expenses:
Rent: $900 - it's been tough trying to get a renter in before winter, and we've found that our property manager uses her assistant to show our property. Above we originally thought we'd do it but decided to see what we were paying for. My wife showed the property and the first showing we got a renter. We think we could have gotten $950/month for it if we did it ourselves and are viewing this as a learning experience. We did a 9-month lease so we could show it again in the summer when there is more demand.
Mortgage: $283.42
Taxes: $92
Insurance: $55 - right on
Vacancy: $83.33 - went one month so right on so far...
Repairs and CapEx: $135/month - adjusted for lower rent and no garage/driveway.
Management Fee: $75/month - Going to try to negotiate not paying the lease-signing fee since they didn't find sell the tenant on it.
Cashflow: $176.25 (2115/year)
Year 1 CCR: 9.7%
I'm not terribly upset by this. Quite frankly I'm just happy I don't have to pay for the heat on the house through a MN winter. Next year we should be able to get $950 or $975 in rent and up that CCR.
Major things I learned:
Prioritize a backyard over a front-yard when looking (turned away a lot of applicants)
A 1-car garage is a boon to rentability (though perhaps increases costs equally)
The salesperson makes a huge difference when showing a property.
Get your leases to line up with when there is the most demand. We might try one more 9-month lease even to push us toward June, that seems to be the best time for rental demand in our area.