Hey Fellow MO Investors:
Wanted to share some specific info in this post as I've been doing analysis and don't want to have my head in the clouds, as I'm out of state. Below you will find a deal analysis that is typical of what I'm finding and buying in KC, MO. The plan is the BRRRR out there. The purchase looks what's below. This is a B/C class Grandview home. Of course, cash flows look great.
|PROPERTY INFO||CASH FLOW|
|Rental (AS-IS) ARV||$100,000||Gross Operating Income||$895|
|Rental Rehab Required||$7,800||Other||0|
|Closing Costs total||$2000||NOI||$563|
|Cash in deal||$22879||Debt Service||$278|
|10% Investor Return||$191||M Cash Flow||$285|
|Cash to complete project||$22879||Cap Rate||6.8%|
|Equity After Rehab||$32200||LTV||80%|
|M Rental Income||$895||Title Fees||$600|
|Mortgage Payment||$278||Months to stability||3|
|Vacancy (1 month)||$75||P&I PAYMENT||$278|
Here are the numbers on a refi which I can do 6 months later, if I want to pull ~$10K out:
|Equity Left in Deal||$20,000|
|New P&I payment||$383.71|
|New Cash Flow||$179.22|
|New CAP RATE||6.8%|
|CONV to REFI LOAN|
|Cash out/Left in deal||$13020.93|
This looks like a really good strategy to me - to use my cash, do a deal, pull out the cash (and then some) and continue to roll forward. So, can you guys tell me what I'm doing wrong if anything? I have a pretty good manager on the ground and a crew that she's vetted. Rehabbing one deal right now that seems to be going well.
Any sage wisdom/words of caution? Thanks in advance.
@Don Nelson , few questions to think about:
- What's the nature of the deal? Why do you think you'll be able to add $42k of value for <$8k of renovations?
- I don't see CapEx in your expenses, have you figured for that?
- Management will probably be a little higher 10-12%.
- What about water/sewer?
- Most lenders will want 25% equity on an investment property. You may get lucky and find one that will go with 20%, but I suggest being conservative.
@Jaysen Medhurst - $42K because that's the market/comp value. We got a nice off-market deal. What do you do for Capex? Our thinking was we pull out cash on the refi and keep ~$3k in reserves for Capex per property. Management is exactly $80 per door. Water/sewer is paid by tenant. My lender allows an 80% LTV on both purchase and refi. Thank you! I appreciate your comments and hope my bases are covered.
@Don Nelson , 7.5% of GSR is a good baseline for CapEx. Then adjust up or down depending on age of the property and any recent renovations.
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