First Kansas City Turnkey Purchase

[Chris Nordella]

Hey Everyone, 

I figured I would document my first turn key purchase in Kansas City, MO. I read another members similar blog and found it very helpful. I won't be naming company names unless through private message for feel free to ask. 

I researched a number of turn-key companies before narrowing it down to a few. I also found an area that I was comfortable enough (a BP member drove the area and gave me the low down) with and pulled the trigger on one. 

My wife and I executed the contract on 2/10. The lender that BP suggested works weekends & as a Realtor myself, I really appreciate that. Also, every company & seems agent I have spoken with seems to know and respect this guy. Locked in my rate this morning (5% w/ 20% down). I was tempted to by down the rate to 4.75% since I negotiated $1600 in closing cost credit but realized I'd rather keep the maximum cash in my pocket. The more cash I keep, the quicker I can buy #2 if all goes well. And really after looking at the number, the .25 difference really wasn't worth it in my opinion.

Also, my contact at the turn-key company and title company they chose has been working this weekend as well. There has already been a string of emails going back an forth this morning. We have reach out to the physical inspection company to schedule the inspection. This company was also chosen through BP suggestions and vetted through reviews and past clients. 

Off to a good start I suppose. Here are my research numbers. I know it always looks better on paper so we will see in 12-13 months where the numbers actual fall.

Purchase Price: $85,000

Down Payment: 17,000

Estimated closing costs after credit: $1,100ish

Total Cash Out of Pocket: $18,100ish

Mortgage Payment: $365

Rent: $948

Gross Rent: $11,376

Estimated Expenses:

Property Tax: $486

Insurance: $675

Property Management: $910

Vacancy: $910 (8%)

Maintenance: $910 (8%)

NOI- $7,484

Cash Flow: $258.66

Cap Rate- 9%

COC Return: 17%

Again, follow along as this newbie enters the world of REI.

If you comment, please make it constructive. None of that negativity please. 

[Cliff Harrison]

Congrats, I think you did pretty well here. My recommendation is to figure in $100-$125 for CapEx right away, assuming you have a long term hold in mind. I also like the zip code you bought in, some nice neighborhoods in there. The property tax is surprisingly low. My only house in KC with lower tax is in a borderline hood area. I strongly recommend to run the address on rentometer.com (I have a professional subscription, but anyone can run a general analysis) and confirm the market rent. Even the most reputable turnkey companies naturally fill their properties at the top of the market rent it makes all the other metrics look great and maximizes the purchase price potential. Also check comps on MLS/zillow and make sure the purchase price seems to fit and you aren't starting with much negative equity. Regarding vacancy and maintenance, consider costs of make-ready and LEASING FEES between tenants in addition to month-to-month items. With just one property in the portfolio right now, be conservative. PM if you want any help.