Charleston, SC - Deal Evaluation and Feedback

10 Replies

Hi Bigger Pockets!

I've been a member for probably about a year now and have done a lot of listening to podcasts and reading forums and books in that time. I very much appreciate all the knowledge so freely shared on the forums! They’re seriously a gold mine for an aspiring investor like me!

I'm moving from Long Beach California to Charleston, South Carolina very soon for about a year for work. I've been saving up for a house for a couple years so I really want to make my move in REI when I get there. My plan right now was to look for an affordable 2-3BR/1.5-2BA single family house in a nice area with a good school district to buy. I don't really want to do a total remodel but I'm excited about putting in a little bit of TLC and sweat equity to do some basic stuff (painting, trim, flooring, replace appliances, outdoor cleanup, etc) to make it nicer and more appealing for myself (since I'll be living there for a while) and also for my future tenants after I move out.

I’ve been doing a little bit of looking around on the mls (via Zillow) just to try to get a feel for some price ranges in the different sections of the city and surrounding cities/towns and I think I might have found a pretty good deal but wanted to get some feedback on it and see what I’m missing and what I should be looking for.

Here are the details:

Location: Trailway Dr, Summerville, SC

List Price: $149,000 (assuming it was purchased for list price)

Down payment (20%): $29,800

Closing costs: $4,000

Total amount out of pocket: $33,800

Assumptions:

rental rate: $1,550/month (median rent for that area from rentometer.com)

Insurance rate: 0.50% of sale price (estimated, I haven’t gotten a quote on this)

tax rate: 2.03% for rental property (from Berkley County Website)

Vacancy/Loss %: 5%

Repairs %: 5% of Gross Revenue

Cap Expense rate: 7%

Prop Mgt fees: 10% of Gross Income

Mortgage interest rate: 4%

I have an excel calculator that I built to learn how to evaluate deals like this but I'll summarize the numbers below.  My gross revenue (after vacancy loss) is estimated to be $17,670 / year.

My total expenses (including taxes, insurance, maintenance/repairs, saving for cap expenses, property management fees, tenant placement fees (assuming new tenant every 2 years), annual inspections, and lease renewal fees) are estimated at $8,925 / year.

This leaves my NOI at $8,745 / year.

Assuming a 30 year fixed mortgage at 4.0%, my yearly debt service (interest and principal) would be $6,829.

This leaves me $1,916 of yearly cash flow or a cash on cash ROI of 5.7%. Including equity with the debt paydown this would be a ROI of 11.9%.

The home is advertised as in the finishing stages of being refurbished/upgraded with some finishing touches still needed on the outside (although it sounds like they intend to finish the work and have it move in ready before selling, I’m just going from a Zillow post here).  

It also looks to be in a good school district. From what I’ve heard the schools in Summerville are significantly better than North Charleston a few miles south.  It looks like its in an “Area of Minimal Flood Hazard” from the FIMA map but I’m not sure how to estimate flood insurance yet.  

Any and all feedback for me on this deal would be very much appreciated!!

Thanks for reading :)

-Henry

Hi Henry - thanks for the post, and allow me to make an early welcome to Charleston!  I'm very familiar with the metro area, and am happy to help provide feedback on this opportunity.  I'm around this week - feel free to get in touch if you'd like to discuss live.

@tonygande is a local broker  @Russ Scheider scouts out off market properties..  

I do think the tax rate though for rentals may be a little higher than you think  

North Charleston is an up and comer we have built about 15 18 homes there just off of Park Circle its got a great walk score and it has a magnet school and that is the big draw.. plus not so far out..  although it really depends on were your working. 

downtown is fun.. we build a lot there price points though start in the mid 400s.. 

My by far favorite spot in the south  at least the peninsula of Charleston and Old mt. Pleasant I love that little area too.. but price points higher for sure but when you go you will see why.

Troy Gandee is who Jay meant to reference as a broker.    And the tax calculation looks about right to me.    It would be about 1/3 that if it were owner occupied.

Things will be less expensive in the Berkeley County part of Summerville because it's a different school district and less highly regarded than the Dorchester County part.   It's growing fast though and the rent you suggested might be about right.   The devil is in the details...

Thanks very much everyone for the warm welcome and the feedback! @Joel Good I'll send you a message but any feedback you have will be helpful for me!

@Jay Hinrichs I've heard good things about Park Circle and the North Charleston area would actually be more convenient for me location wise for work but I was concerned about the quality of schools not attracting families to that area and that eventually limiting my potential renters... How does the magnet school system work in SC? Would families purposefully move nearby a magnet school? 

Thanks for the tip about Berkeley county vs Dorchester county in Summerville @John Semanchuk ! I hadn't realized the city was split like that... 

I'll reach out to you when I get there in about two weeks @Russ Scheider ! If I could find something off market that might be a better deal but require a little more rehab work on my end I think that would be ideal!

Originally posted by @Henry Murray :

Thanks very much everyone for the warm welcome and the feedback! @Joel Good I'll send you a message but any feedback you have will be helpful for me!

@Jay Hinrichs I've heard good things about Park Circle and the North Charleston area would actually be more convenient for me location wise for work but I was concerned about the quality of schools not attracting families to that area and that eventually limiting my potential renters... How does the magnet school system work in SC? Would families purposefully move nearby a magnet school? 

that's my understanding the magnet school in N Charleston has a pretty robust new build community right by it.. its an area that is changing rapidly from what I can see..  

Originally posted by @Russ Scheider :

@Henry Murray look us up next time you are in town. I am an agent and an off-market specialist  

@Jay Hinrichs thanks for the shout-out. I got my license a few months ago and am working with @Troy Gandee as my broker. Still doing everything I was doing before, just adding client services and commissions to the mix. 

congrats on your license.. !!!! 

@Jay Hinrichs you are one of the many who encouraged me to get licensed. Based on the past 2 1/2 months activity, I will be able to help an additional 15 sellers per year and EASILY add 6 figures to my income. I am not going to stop wholesaling, flipping and buying properties, but now there is an additional way to solve real estate problems for people and get paid (cheerfully) for doing it 

Originally posted by @Russ Scheider :

@Jay Hinrichs you are one of the many who encouraged me to get licensed. Based on the past 2 1/2 months activity, I will be able to help an additional 15 sellers per year and EASILY add 6 figures to my income. I am not going to stop wholesaling, flipping and buying properties, but now there is an additional way to solve real estate problems for people and get paid (cheerfully) for doing it 

congrats.

there was a post on BP  a while ago nice young couple just north of New Oreleans.. all excited about traditional wholesaling  they had sent out thousands of mailers  spend lots of time energy and money on it..

they went on to say they had yet to find a deal good enough.. but had referred 6 or more people to their friend an agent who went on to list and sell them.. and as you know you cant pay unlicensed folks a referral fee as an agent.. so there they are spending all this money and making zero.. makes zero sense to me especially in todays market of very tight inventory.. and quick days on market on MLS..

and of course another wholesaler we never heard from again..