Help analyzing a deal in Winston-Salem, NC

3 Replies

I have been in communication with a potential seller in Winston-Salem, Forsyth County, NC (2 hrs from where I live, so I would likely get a PM company).

Details on the property/deal:

  • Asking 26k (owner shared they purchased for around  22k, which I verified in county records)
  • Seller purchased in Aug/1/14 for 22k and put in about 5k in repairs (new heat pump, air handlers, pumping pex tied into city line, new cabinets, countertops and tiles, new service panel, painted).
  • Rented at $550 with Section 8 tenants in place (vetted single working mother with her 2 kids) until October.
  • Seller moving out of state, so, motivated but won't sell under purchase price.
  • Zip code 27105, west of University Parkway
  • 2 beds, 1 bath
  • 760 sqft
  • Built in 1950
  • Tenant-paid utilities
  • 1.265% tax rate

My thought was to offer 24k with seller paid CC (estimated around 2.5k). The community (to me, seems like a B- based on crime data and income data (hopefully I am not misanalyzing this area) but the city is growing pretty well thanks to Wake Forest University and of course the Tobacco industry, so I may be misinterpreting it)

More on the city... (http://www.bestplaces.net/economy/city/north_carol...). 

I need help analyzing this deal to see if it would be good, as it seems to me that  assuming a 4.5% interest rate on a 15 yr note or 5% on a 30 year note results in 192 monthly or 185 monthly, respectively, INCLUDING taxes and a rough estimate of 600/year insurance (which shouldnt be the case as my other properties albeit being newer and much more expensive pay 600/year)

So... if I assume I end up paying full ask and CC's....

Rent:        +  550
Debt:        -  107   (or 152 @ 15yr)
Taxes:      -    30
Ins.   :       -    50
HOA: - 0
Vacancy:  -    46
Maint.:     -     46
PM    :      -    55

============

Cash Flow:   216/mo @ 30yr or 171 @15 yr

NOI : 216*12 = 2592/yr

Given the initial investment of 6625 (down payment) +2.5k (closing) = 9,125, this equates to a 28.41% ROI

2592/26k = 9.97% cap rate.

Is this accurate?

What does BP think?

Thanks!

NOTE: The reason I said this is a B neighborhood is due to area activity and incomes, and the fact this house is surrounded by more expensive homes, but I think, in reality, this is a C- or D neighborhood by "cost of home" standards

This looks like a good find. W-S has some interesting spots. My knowledge there is limited, but there are (or were) some places where the numbers look 'no-brainer'. Salem college west over to the BB&T field has (or had... not been there lately) some <1000 sq. ft. printing presses.

I assume there is no central HVAC. That's good from a Cap Ex standpoint. I'd still add in $20-$40 monthly escrow for Capital Expenses, depending on appliance and water heater age. And "Built in 1950" with "Section 8 tenants in place" would be a red flag for me. One flake of paint and you'll face a staggering remediation bill. Get a lead based paint test kit and verify (yes/no) for yourself on trim, siding, and windows at a minimum. LBP was used in low (entry) priced houses in the '50s... just be sure there is no peeling paint. ANYWHERE. A S-8 inspector will be looking;)

There is central HVAC, the Lennox unit is 2 years old. The paint is all new (no lead based worry, I think but will double check). The appliances are all new, low end, but new. The water tank is around 10 years old, but that's a ~$250 expense that I am not super concerned about. I have thought of purchasing a 1yr Home Warranty for the house if need be, or asking the seller for one.