Will these numbers work to build a garage apartment to rent?
Hello BP!
I have been working with an architect and builder on getting drawings made and construction quote for a garage apartment and would love feedback on this deal.
I live in the Houston Heights area. (For those not familiar with Houston, the heights is a trendy neighborhood near downtown that originated in the 1920s and is experiencing a lot of new commercial and residential builds including trendy restaurants, coffee shops, and boutique stores)
I have currently have a 5000 sqft property with a 1100sqft house (simple 2bed/1bath) built in 1930 and restored about 10 years ago. I have a detached 2-car garage and am planning on demolishing it to build a 2-story garage apartment with a 536sqft 2-car garage on the first floor, and a 764 sqft 2 bed/1 bath second story apartment. I have an ally that runs behind my property and I plan on having my renters access their home through the back. They would have half of the 1st story garage for covered parking, their own laundry, and a second story balcony with a downtown view.
I am looking to rent the garage apartment out as my first rental.
Here are the numbers:
I am looking at $110,000.00 of construction costs.
I plan on paying for this with a 15-year 5.25% loan.
I will have a monthly payment of approximately $884.00
I am estimating an additional $100 a month in property taxes as a result of the addition
My Insurance agent quoted me an additional $54 a month to insure the new build.
I am estimating another $150/mo for property management fees and maintenance (I am managing the property myself) Since it will be new construction, I am hoping to not have any major capex needs in the first couple of years.
Total estimated monthly expense: $1188.00
I've seen rental comps for 2bed/1bath rentals below 1000 sqft of livable space as high as $1975/mo (high end apartment complex nearby) and as low as around $1200/mo (rundown older house nearby)
My goal is to get $1550/mo for rent
Questions:
1. What other monthly expenses am I missing?
2. Is my PM & maintenance fee of $150 too high? too low?
3. With a projected monthly revenue of $362.00 (1550-1188), is it worth it to take on this construction project?
4. Should I take my $110,000 loan elsewhere to invest?
5. Is a net profit of $362/mo good? bad? average?
6. Any and all feedback, analysis, advice, or general thoughts are greatly appreciated.
Thank you in advance for sharing your wisdom with a rookie anxiously considering his first major real estate investment!