2 SFRs in Indy for 10% down. How did I do?

1 Reply

I started looking in Indy for one SFR to get my feet wet in a new market. I have two SFR in Stockton, CA and that market is now overvalued. In the middle of my search I heard that HomePath was doing 10% down with no MI on non owner ocs. My lender confirmed this and we are now in contract with these terms. As long as the inspections and underwriting go well I will be closing in a few weeks. The ROI and net cashflow are a bit lower than I would like but still better than what I'm getting in CA, I was also very conservative with closing and repair costs. I can still walk away only losing my $500 EMD so speak up if you see any issues!

Here are the numbers:

House A:

Built in 1990s 3/2.5 1600 Sq Ft. Nice street in a mixed area. Schools are mediocre. Similar smaller 3/2 across the street rented for $1199 in August. Minimial if any repair required.

Purchase price: $116,000

Down payment: $11,600 (10%)

Closing costs: $3000 ( projected )

Repairs: $1000 ( projected )

Rent: $1250/mo ( see note above )

Mortgage: 5.2% fixed 30yrs.

Insurance: $81/mo ( does this seem high to anyone familiar with Indy? )

Taxes: $247/mo (~30% higher than neighboring houses of similar size. Dont know why yet. Should I appeal the assessment? )

PITI: $900/mo

Expenses:

Vacancies (8.3%): $104/mo

Management (8%): $92/mo

Maintenance: $50/mo

HOA: $22/mo

Total expenses: $268/mo

Cash flow: $82

ROI: 6.2%

House B:

Built in 1980s 3/2 1800 Sq Ft. on 1+ acre lot. Nice area. Schools are mediocre. Rent comps are hard because not many in this neighborhood are rented. Sales comps are in the $150k-$180k range. Minimal if any repair required.

Purchase price: $134,000

Down payment: $13,400 (10%)

Closing costs: $3000 ( projected )

Repairs: $1000 ( projected )

Rent: $1300/mo

Mortgage: 5.2% fixed 30yrs.

Insurance: $83/mo ( does this seem high to anyone familiar with Indy? )

Taxes: $179/mo

PITI: $924/mo

Expenses:

Vacancies (8.3%): $108/mo

Management (8%):  $95/mo

Maintenance: $50/mo

Total expenses: $253/mo

Cash flow: 123

ROI: 8.4%

Thanks for your feedback!

Updated over 3 years ago

Just wanted to add that sales comps for House A are in the $130k range currently.

Using your numbers I get cap rates of 6.5% and 6.8%. Your cost of money is 5.2%.  I don't think this is a big enough spread.  I would want 3 percentage points.  Other potential issues:

I seldom find properties with only $1,000 rehab needed,

I budget $125 to $166 for maintenance and capital reserves,

I usually have to pay management 10% of rent + one months rent to find new tenants.

In other words I would budget higher expenses resulting in even a lower cap rate.

Good Luck.

Bill

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