Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
7y
@Patrick Blankenship there's an awesome analysis out there somewhere on capex, the results of which are captured in one of the BP books. Bottom line is that the average SFH, no matter the $$ spent, game out to around $185/no when you factor in replacement cost and life expectancy of major items. You may be able to get away with less depending on what you're comfortable with, but at a minimum I'd make your capex at least $100.
The only other thing i see is insurance...have you gotten an actual quote for coverage on that property? I would recommend it. I ran quotes on similar priced investment properties and it came out to $75/mo...at this point when i run numbers without a quote in hand I’ll never use less than $100
Rental Property Investor · Petaluma, CA · Member since 2015 · 151 posts · 143 votes
7y
What is your question? Depending on class I think you may experience higher vacancy rate. Also running #s as % is the norm but not sure when you are dealing with such small #s. A new hvac or roof is same cost for 60k or 120k house. Definitely get a solid inspection done on major cap ex items as their life expectancy is important and will cut into your cash when they come due. Way to start taking action.
Indian Land, SC · Member since 2015 · 13 posts · 2 votes
7y
@Noel R. Thanks for the response. I guess when I typed the question it did not save. Rookie mistake. I agree with your comment on CapEx. Ran the numbers with the realtor who also invests in the area. Possibility of seller financing and def an inspection contingent to purchase. Its a "good" area, being active duty military myself, I am familiar with proc and cons. There are two major universities and a massive Good Year plant along with the largest Army base by personnel. My concern is the diversity street by street. One block is run down, the next is Class B+, then back to C and back to B+ with some A class spots sprinkled in. There are no "good schools" in the entire city. Its an interesting area (Fayetteville NC). I live in Charlotte about 2 hours away so have options here as well, just not as many. Alternative is to wait, build my personal capital, and make move locally. I dont want to be the "what if" guy- bc I have been for the past several years. Thanks!
Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
7y
@Patrick Blankenship there's an awesome analysis out there somewhere on capex, the results of which are captured in one of the BP books. Bottom line is that the average SFH, no matter the $$ spent, game out to around $185/no when you factor in replacement cost and life expectancy of major items. You may be able to get away with less depending on what you're comfortable with, but at a minimum I'd make your capex at least $100.
The only other thing i see is insurance...have you gotten an actual quote for coverage on that property? I would recommend it. I ran quotes on similar priced investment properties and it came out to $75/mo...at this point when i run numbers without a quote in hand I’ll never use less than $100
Indian Land, SC · Member since 2015 · 13 posts · 2 votes
7y
@Patrick Menefee good info and yes a local insurance quote was actually only $50/month. Totally tracking CapEx expenses (had to replace a roof on my former primary residence) so am working the sale price to conform. Its an investor owned home, just trying to get rid of it and move on to something bigger so I think there is some room to make an actual good deal. Looking to make my money via the sale price vice back end.
Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
7y
@Patrick Blankenship good call on making money from the buy. Only thing i would caution is that getting the immediate capex covered up front unfortunately doesn’t beat the law of averages...it just means that hopefully you only have to pay those expenses after building 10 years of reserves instead of 10 months.
But even with increased capex reserves, given what you said about insurance, it looks like it’d still cash flow above 8%
Guy with Great Hair · Austin, TX · Member since 2013 · 2k+ posts · 4k+ votes
7y
average deal for fayetteville. seems like it's in an older neighborhood, are you SURE about the rents?
you won't get any appreciation unfortunately so I would take that out of your calculation. In fact depending on the area it very well may depreciation.
Indian Land, SC · Member since 2015 · 13 posts · 2 votes
7y
@Alexander Felice Great point on depreciation. I actually mentioned that this morning when speaking to the realtor bc it has decreased in value $10k since 2010. The rent was a "conservative" estimate based on the area and others' experience locally. Cash flow would be the main reason to go for it. Its also a seller financed option at 6% with a 10% down and balloon @ year three which would be around $42-52k depending on the purchase and how much I put towards principle. Great feedback @Patrick Menefee, thanks