Rental Property Investor · Kansas City, MO · Member since 2014 · 72 posts · 28 votes
I recently purchased 2 fourplex properties and undertook a massive renovation. This was biggest purchase in the history of my company. All the properties have new tile, bathrooms, kitchens, SS appliances, granite, redone floors, new paint inside and out, windows, new water heaters and HVAC systems in each unit. We rebuilt fence partitions, installed new LED lighting, new sidewalks and gutters and installed a community firepit. Overall the project took 2 months and cost 140K for the rehab and 295K for the purchase. I am interested in knowing what YOU think of the deal. It is located in Grandview MO and will be the nicest fourplex units in South KC and Grandview. It should provide maintenance free cash flow for years to come because everything is new. Here are the numbers:
Purchase: $295K 2 4 plex buildings
Rehab: $140K
Total: $435K
Rent: $795 per unit x 8= $6360 per month $76,320 per year
Taxes: $4100 per unit for both building
Insurance: $4200 per year
Water/sewer/capex/vacancy: $600 per month tenants pay utilities
I forgot to mention, the roof is 2 years old. We also cleaned up the trees in the front and back of the property. We are calling our new small apartments "Upper Room Commons". We are really trying to upgrade the housing in Grandview and doing our best to set a new "standard" for rental property. We have not had vacancy in 3 years! We currently self manage all 17 of our properties. We paid cash for them and are realizing cash flow of approximately 15K per month. Our goal is to buy 3 more properties next year and get our cash flow to 20K per month. At this point we will evaluate where we are and the time that we have invested weekly in our rentals and figure out if we want to go bigger or stay small.
I don't know your market at all so take what i say with a grain of salt :)
The properties look great for my area and would attract a good tenant base. Your numbers look good and I would recommend ensuring you have the funds set aside for repairs/maintenance and improvements even though you appear to be setup nicely (nothing worse than a small repair turning into a big one). If they are all cash, the idea of leveraging them for additional ones would easily cross my mind. HELOC for down on another etc.
We paid cash for them and are realizing cash flow of approximately 15K per month. Our goal is to buy 3 more properties next year and get our cash flow to 20K per month.
Sticking with the latest 2-4,
pp+improvements=730k
noi=60820
c/c=c/r=(all cash) = 8.3%
Assuming your NOI is accurate (ie left out no expenses), the c/c is good in this environment. Issue becomes the FMR vs your assumed Rents.
@mike cumbie we thought about leveraging just not there yet. We have a little under 2 million in our rentals and looking to purchase a few more. Thanks for the feedback
@Timothy Aughinbaugh I know nothing about your market in terms of what kind of area these rentals are in, i.e. low crime, high crime, income levels, etc.
With that said, in our area in CT these units and the condition they are in would attract quality tenants for sure. Nice work.
the neighborhood is located in a nice part of Grandview in a B area. The average median wage is 37k. The tenant base will be international house of prayer students and staff. My company exclusively serves them.
My thought exactly! Are these 2/2 or 2/1 units? How many sq foot are they? Looking forward to seeing how this works out. $795 is getting close to the basic 3 bedroom SFR market rent in the area. Are you leased up at that rent already? They do look great.
Cliff we preleased 2 already and will have no problem with them at 795 per unit. Our demand is strong and when I make them this nice my clientele will pay for the upgrades. The feedback we have recieved in our community is excellent and we actualy have a waiting list for our SFRs. Each unit is 1000 sq ft 2 bedroom 1 bath with 1000 sq ft unfinished basement. we are seeing our portfolio return approximately $400 per bedroom per month. On this building we provide yard maintenance, trash, water and sewer, snow removal which is accounted for in my above calculations. I self manage snd spend about 10 hours a week on my rentals doing regular maintenance and mowing. In the last 3 years we have had 92% of our tenants renew their leases. We have across the board found that high end units done with care and excellence are highly desired!
"Water/sewer/capex/vacancy: $600 per month tenants pay utilities"
That seems a little low. I'd bump it up to at least one month's rent AND you still have to save for long term Capex issues, besides there may be some water line issues between the house and the street or some other random issue.
I'd be very tempted to take a loan out on half and diversify.
the neighborhood is located in a nice part of Grandview in a B area. The average median wage is 37k. The tenant base will be international house of prayer students and staff. My company exclusively serves them.
As a general rule diversification is a good thing. In the future, you might want to broaden your tenant base.
we have quite a pool of people to rent to. It also is positive that our company is highly regarded for the work and product we offer. We will continue to rent to IHOP staff and students and focus primarily on them. We could always up it up later to everyone. IHOP has 10k or so people.
I think the aesthetics look good as this has become trendy. I think it will stand the test of time and not look dated quickly. The only complaint I have and I cant tell from the pics is if the one kitchen has upper cabinets as well as shelving? I think some open shelving is ok but not my preference. I think / feel you should have some upper cabinets for dishes or food that should be hid away. It looks like the second set of kitchen pics is a different unit?
Wondering if you've done the analysis on what you'd make if you converted to condos/townhomes? I'd be curious what those numbers look like if you've done the calculations.