A Rookie DFW SFH Deal Analysis

6 Replies



807 Dunkirk Ln., Arlington, TX 76017
3 Beda, 2 Baths
1,856 sqft

Sold for $116k in 2013.

Preface: In trying to develop a prospectus of sorts to present to lenders and other investors as I develop my business, I chose a sold home as my model for more accuracy. I also compared 3 properties similar in age, description, and location, although an agent could do this much better than I. I would plan on using property management, which is built-in to this analysis. The elementary school isn't good, but the middle and high schools are decent.

I'm supposing here that I am the one who purchased this home.

Zillow's Description: 
"Like new South Arlington home, Mansfield ISD, 2 living areas, formal dining and bfast nook, fresh paint and newer carpet, large fenced yard, 2-car garage, near shops and schools." - Zillow.com

Deal Analysis: 

Using the SFH Analysis Excel sheet by @Brandon Turner.

NOI: $10,185

Cash Flow:
Net Operating Income: $849
Mortgage: $470
Total Cash Flow: $379/Month 
Return on Investment: %17.08

( Cash flow Includes costs listed below but the spreadsheet forces $2,900 in closing costs, which may normally be paid by the sellar, I think. )

Purchase Price: $116k
Repairs: $500 ( Stated to have been like new. )
Downpayment: $23,200 (20%)
Financed Portion: $92,800 (80%)
Monthly Rent: $1600 ( Comparative + adjustment from Rentometer.com)

Vacancy Rate: 10%
Property Taxes: $270/Month ($3233/Year)
Insurance: $288/Month ($3456/Year) - Suggested on Spreadsheet
Maintenance / Repairs: $100/Month ($1200/Year) - Suggested on Spreadsheet
Advertising: $150/Month ($1800/Year) - Suggested on Spreadsheet
Administrative: $150/Month ($1800/Year) - Suggested on Spreadsheet
Utilities: Paid by tenant

Conclusion:

After comparing and running my numbers through Brandon's sheet, I feel like the final cashflow of $379 is a well-buffered number. Although I haven't seen the street and I haven't asked about disturbances nearby, I would call this ideal if there weren't any deal-breakers. 

I hope this was a successful pick and I'd appreciate any feedback  on this property!

-Zachary Durland ( DFW, back from Japan in May. )

Looks interesting. The closing costs in Texas are commonly split. The buyers costs include some title company fees, appraisals, filing fees etc. I would expect $3000-$4000 on a house in this price range. Also you will need an inspection which isn't usually included on the HUD-1 closing costs. in Arlington be sure to check the foundation since a bad foundation can add $10,000+ to your repairs.

I have never seen a house that you can really not sink at least $1000 in initial repairs and make ready expenses into. 

Personally I don't include anything for advertising since I get great results from Craigslist and word of mouth.  Any that I did would be taken from the vacancy reserves.

I don't see anything for capital expense reserves for HVAC, roof, etc.  This I am guessing is a house built in the last 10 years so probably doesn't need a lot withheld maybe 5%.

I would expect insurance to be closer to $1600 or so for that price point.  Maybe factor $150/month or just contact an agent and get a quote. 

Are rents that high in Arlington now?  I haven't lived there since 2009, but maybe I should have kept my house there.

@Paul Ewing  Thanks for your reply! I've seen you on other DFW posts and appreciate your input.

Yes, the foundation would be big on my list and this is assuming that inspection and such didn't lead to having to put more in initially. 

As for current rents for 3br 2 bath, it look like they're between 1300 and 1700 depending on SE or SW Arlington. I'll be developing a feel for that more and more.

If I can ask one more question, could I use this data as a showpiece to help get financing either by bank, private, hard-money, etc? Or would you present it differently? I plan to include my personal credit information, as it's very good.

Thanks again!

@Zachary D.  

The insurance cost is way out of line in my opinion. It should be more like $100 a month. Also, what would you spend $1,800 a year on advertising for, if you just have this one house? Rental advertising is free on Postlets and Craigslist, maybe $10 for a yard sign if it's a busier street, but once its rented, no advertising will be needed.

I see you just got that info from the spreadsheet, but perhaps that is assuming you are buying a mulitfamily property instead.

@Zachary D.  I would definitely write up something like this when you go to present to lenders.  Personally I am using the PDF that the Bigger Pockets Rental Analysis Tool produces.  Printed up in color on heavy weight paper it makes a nice presentation.  Your format is nice and would be good with a couple changes in format (and more solid numbers of insurance and such).  I found myself scanning around looking for info.

I would move the purchase and loan information to the top.  Then have the cash flow section with Rent amount, Total Expenses, Total Reserves (maintenance, vacancy etc.), then the cash flow.   Then I would have a section with the individual expenses and another for individual reserves details.

You will have to present your personal financial statement since this is your first property it will be the primary thing that will get you the loan.  Having the info on the expected income and expenses of the property will indicate that you probably have a good idea of what you are doing and will make the lender more comfortable especially if they see you have money allocated for property management and reserves.  Look around and find an good template for a personal financial statement and fill it in to take with you.  Most people go to the bank with a vague notion of what they make and have in the bank but all they can do is get an application and a financial statement form from the loan officer and go home and fill it out. 

I would also take copies of your last two income tax statements, W-2s, last months bank and investment account statements as backup.  It is better to have these ready in a folder if asked since it makes you look more prepared.

@Jason C.  Thank you so much for the corrections the insurance and advertising costs! That's very helpful and I had an idea that some of that might not have been appropriate. I'm glad you saw that it had just been included in the calculator.

It seems like with lower numbers the cashflow should be better.

@Paul Ewing  , Wow, thank you for the detailed critique!

I'll shift the information accordingly and prepare the other documents as you recommended. 

As you might have seen in an earlier post of mine, I'm returning from living in Japan in May and a w-2 job may be a challenge for me. So, I could be showing this to private or hard-money lenders and the like. In which case, they would be looking at Japanese w-2s showing employment but no current or future proof of employment.

This is my big challenge.

I'm afraid that having just left a job and having no recent job history in the U.S. will be tough and leave me presenting to private lenders and the like.

If anyone here has any though about what they would like to see from a guy with solid employment oversees, but none now, I would appreciate the insight.

Thanks for your advice!

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