Knoxville Tennessee SFR

5 Replies

My first post on BP...

My name is Nolan and I live in the Oakwood/Lincoln Park neighborhood in North Knoxville.  My goal for this thread is twofold.  First, I'm hoping to meet some other investors in the area that I can connect with.  Second, I want to run some numbers by you all and get your thoughts.  

First Purchase:

Purchased a SFR in my neighborhood a few months ago

2 bedroom/1 bath

Purchase Price: $60,000

25% down plus closing costs etc ($18,000)

Repairs (paint and other cosmetic fixes) $1,000

Rented immediately for $825

Mortgage $375

How did I do?  

Second Purchase: 

Purchased a SFR in my neighborhood last week

3 bedroom/1bath

Purchase Price: $60,000

25% down plus closing costs etc ($19,000)

Repairs (new windows, paint, and other cosmetic fixes) $4,000

Will rent for $900

Mortgage $350

How did I do?

Would really love a second set of eyes.  

My overall strategy is thus:

Buy and hold properties that exceed the 1% rule.  (More like 1.35-1.4) 

I have a full time job, so I don't want to put too much effort into the properties.  Strictly cosmetic fixes.

I look for properties that have the following characteristics:

Oakwood/Lincoln Park Neighborhood

Around $60,000

2 bed 1 bath

Newer roof, HVAC, Water Heater, updated breaker box (larger expenses)

Easy to maintain property.  Level lot with no trees.

Tall crawl space to work (I'm 6'4".)

Around 1,000 sq ft

Hardwood floors, vinyl and tile throughout (No carpet)

My friends would live in it

Quiet side street

Are these cash-on-cash estimates accurate?

Property 1

825 rent

-375 mortgage

- 82.5 vacancy (10% or rent)

- 82.5 repairs (10% of rent)

- 82.5 capital expenditures (10% of rent)

Cash Flow=$202.50 x 12 months = $2,430/year

$2,430 divided by $20,000 initial investment = 12% cash-on-cash return

Accurate?

Property 2

900 rent

-350 mortgage

-90 vacancy

-90 repairs

-90 capital expenditures

Cash Flow=$280 x 12 months = $3,360

$3,360 divided by $22,500 initial investment = 14.9% cash-on-cash return

Accurate? 

@Nolan Wildfire ,

Both are strong properties, congrats!  Couple thoughts. With the little bit of rehab done to each, were you able to build in any/enough equity to do a cash-out refi after seasoning to get some of that cash back out?  Also, regarding your numbers - does your mortgage number as written include insurance and taxes as well?  And you may want to consider adding 10% for property management, even if you’re self managing currently...that way you will be more than ready if down the road you did ever want to hand it off to a PM.

@Tae C.   Quite honestly, I haven't looked at the cash out refinance just yet.  Great idea!  I will have to explore that.  The mortgage number does include taxes & insurance.  I should have made that clear.  And including 10% for property management is also a great idea, in case I ever go down that path.  Sound advice all the way around!  Thank you for taking the time to respond!  Very much appreciated.  

Those look like very good numbers, especially just starting out.  And in a very promising neighborhood too!  Although I try to invest almost entirely based on cash flow it's obviously wise to consider likely appreciating areas as it seems you have.  Let me know if you find any decent deals in Knoxville that you don't want and I'll pay a finder's fee or if you're interested in partnering on a flip that'd be cool too. Especially if repair costs are similar($1,000-$4,000)!! 

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