Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
Hey Everyone,
So here's what I have:
I'm in the St. Louis area and the property I'm looking at is a 4 unit 2 bed 1.5 bath townhome asking price is $599,900, I'm assuming because of the many repairs it listed such as new roof, floors, kitchen and the list goes on. With the area it's in and all the updates I would assume the rent to be anywhere between $700-850. The property tax however is what's bothering me its about 9K (which could be completely normal but I'm not too sure). So I ran it through the BP calculators and well I have a negative CF of like $960 (YIKES!!!) Any who I would love to house hack but this doesn't seem like a good deal. Am I doing this wrong or is the price and the property tax just too high? I'm just not sure about this one so I would love some feedback and I'll provide whatever information I may have forgot.
Lender · Spanish Fort, AL · Member since 2017 · 44 posts · 9 votes
9y
Hi LyNetta Hill I'm assuming that the property tax for the property would be $9000 a year which would give you $750 per month to run the numbers! When running the numbers you would simply divide $9000 by 12 to get your monthly number! Hope this helps.
Auburn, NY · Member since 2014 · 22 posts · 4 votes
9y
obviously different markets have different numbers but I could get a similiar house/rents at under $150,000 purchase price. No way you ever make money at those numbers.
Lender · Spanish Fort, AL · Member since 2017 · 44 posts · 9 votes
9y
LyNetta Hill yes it seems WAY too high! There is a way to appeal it, but it can take time. Local governments assign values in their jurisdictions sometimes only once every three years or possibly longer. They can also make mistakes from time to time. To be honest if it were me, I would move on. Finding a property that is going to give you not only cash flow, but a significant amount to give you security. Things go wrong with pretty much all properties at one point or another and if you don't have enough "cushion" you can find yourself underwater quick!
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Jacob Ehrgott The same goes with St. Louis. This deal seemed really bad but since I'm pretty new at this I wanted to make sure I wasn't doing something wrong lol.
@Travis Turnbull Yea that's been my ultimate decision is to find something else that provides sufficient cash flow. I want to make money not lose it. Thanks :)
New to Real Estate · Castle Rock, CO · Member since 2014 · 172 posts · 66 votes
9y
So you have figured you will loose $900+ a month fully rented. I don't think that is a good deal. To me, even the pay down in equity wouldn't be worth it. Unless the rents for this property are drastically under valued. I would say keep looking, keep evaluating and keep an eye out for something better. Don't let your heart make you purchase a deal, use your head.
Lender · Powell, OH · Member since 2016 · 97 posts · 64 votes
9y
1.5% tax rate doesn't seem out of the norm. From Google, "The state's average effective property tax rate is 0.99%, somewhat lower than the national average of 1.19%. Rates in Missouri vary significantly depending on where you live. In St. Louis County, for example, the average effective tax rate is 1.38%.' Best case scenario $3,400 rent on a $600k place is nuts. I'm hoping you had a typo and this place is going for $59,900. In which case the taxes are insane and should go way down once reassessed.
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Nathan PattersonYea it's a pretty bad deal, makes me wonder why they priced it so high. Since I'm trying to house hack keeping my heart out of it is kind of hard but I'll keep trying lol.
@Josh Engelhart Nope it's really listed at $599,900, which is crazy lol
Lender · Powell, OH · Member since 2016 · 97 posts · 64 votes
9y
@LyNetta Hill The house might be worth that much but the numbers aren't great as an investment property. Remember you only have to live there for a year or two if you are trying to house hack. It doesn't have to be the perfect place in the perfect neighborhood. It just has to be good enough and most importantly the numbers have to make sense.
Insurance Agent · Member since 2015 · 191 posts · 124 votes
9y
LyNetta Hill Inpulled up the listing you are talking about and it may be the most over priced property I have seen in our area. Hazelwood in general is prob not the best area to look. If your a risk taker there are plenty of deals in the city with huge potential. I am more comfortable with lower tier units in places like kirkwood, Brentwood and Webster that offer consistent 7-10% returns with almost no chance of depreciation.
Menomonie, WI · Member since 2015 · 25 posts · 5 votes
9y
A good way to quickly vet a deal to see if it will be profitable is by seeing if the monthly rent is at least 1% of the purchase price. If rent is 1% of the purchase price, you'll likely break even, 1.5% and higher and you'll probably earn a profit. Once you get over 2% and you've reached the promised land. For this deal monthly rent is $3200 ($800*4) and the purchase price is $599,900. So, $3200/$599,900 is .5%... which will not lead to a good deal. This method is a good formula to quickly vet a deal, but not foolproof.
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Josh Engelhart It's not worth it...the total assessed value for the past 4 years has been $87,860 so the numbers don't make sense whatsoever.
@Account Closed I was also told the 50% rule is good as well to use to scan through deals without doing the full analysis. Thanks for this though I'll definitely use it.
Rental Property Investor · Saint Louis, MO · Member since 2016 · 162 posts · 53 votes
9y
The assessed value you keep mentioning is not nearly the same as the property value. As an example, look up your house and look at the tax assessment, you'll see that it does not come close to representing the home's value.
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Jeremy Paschedag Whoops is that not the home's value, I just assumed it was. How would I go about finding that? Even though I still don't think it's worth the asking price.
Weehawken, NJ · Member since 2015 · 31 posts · 14 votes
9y
there is normally a ratio for each town of accessed values to real value. That is how you can tell if you can do an appeal.
ie.. lets say you have a million dollar house with a $200K value for taxes. You may be under or over taxed.. normally your county does a annual chart. Here is mine in NJ http://www.state.nj.us/treasury/taxation/pdf/lptva...
In Weehawken the ratio is 42%. So if your house is really worth a million then the fair accessed value would be $420K. In my fake example my tax form has 200K so I am paying about half the proper taxes and I keep my mouth shut. If on the other hand my accessed value was $600K then I can appeal based on the fact that a 600K accessed property should be worth $1,428 million(600K asses divided by .42)
In NJ at least you can appear if your accessed value is at least 10% off, there is only 1 time a year you can do it...
That being said, on $600K purchase, some in my head math would make me think you need to have rents in the $4,500-$5,500 range to even both doing the full math. Of course the exact math depends on interest rates and taxes/expenses and this rent likely needs to be closer to 6K but I can tell you right off the bat that your rent number would be way negative.
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Rich Zellmer Thanks your example really helped. I'm going to search for that chart for my county because I'm very curious to see if the taxes are correct.
Rental Property Investor · Saint Louis, MO · Member since 2016 · 162 posts · 53 votes
9y
As a crude estimate for property value, you can look at the value estimates in both Realtor.com and Zillow.com.
It seems that that property is not good for an investor due to the property value, regardless of the taxes. If I were you, I'd stop wasting time with this one and move on to the next property to analyze. There are lots of tools you can find on BP that talk about how to analyze properties beyond the 50% rule and the 1% rule (that I learned from your thread).
Real Estate Broker / General Contractor / Property Manager · Kansas City, MO · Member since 2010 · 395 posts · 425 votes
9y
@LyNetta Hill run away as fast as you can from this property! You should never purposely get into a negative cash flowing deal. I would, however, keep an eye on this property. It sounds like the current owner spent way too much money on the property and it could turn into a fire sale or a foreclosure.
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Chris Dawson yea I plan to keep an eye out because I believe that's exactly what happened, they spent too much money rehabbing the place and now they aren't making any money.
Hazelwood, MO · Member since 2017 · 18 posts · 3 votes
9y
@Jeremy Paschedag I didn't think about checking other sites to see what the property value is so thanks for the tip. And I've been slowly but surely discovering the tools BP offers to make analyzing deals easier.