The property is a 3 BR/1 BA in Benton Park neighborhood of Bakersfield, CA.
I approached this as a BRRRR deal, and wrote a blog post about my sources for these numbers (including the expected monthly rental income, which I realize is extremely optimistic to many seasoned investors, when compared to Rentometer numbers).
Even at this optimistic income level, I concluded that this deal was unlikely to succeed. Nevertheless, I'd love any and all feedback on my methodology. I care much more about your feedback on my thought process than on the prospects of this deal in particular, which was more of an academic exercise than a serious consideration.
Any chance you could rent to 3 roommates at $675 each? Clearing >$2000. Arms length Househack
The house has some functional obsolescence with only one bathroom
Thanks @Jermaine Chad Ingram . Seems like there are a few 3BR/1BA in the neighborhood, but I agree 2BA would be better. If I padded the rehab budget a bit I might be able to add one. I'll run the comps on 3BR/2BA properties and see how it looks.
RE: 3 roommates @ $675 each- I hadn't considered that until now. $675 does seem to be a conservative estimate for a private room in that area, based on the listings here.
I also just realized- I forgot to include a budget for furnishing the property. Whoops. That'll add at least an extra $6-8k, assuming I go the Ikea route.
@Richie Thomas go the thrift store, Habitat for humanity restore, Craigslist route
From what I understand, hard money is not going to be an option for an auction. I recently was looking at one and I know auctions are different based on state/area, but you probably need the full $100k or so up front. Hard money won't provide that until you have a purchase agreement. That's how it was in Florida, might be different in CA.
I lived in the Central Valley for a while. I also skimmed most of your other post. I think your utilities are too low, property taxes too high. PMI can be removed as you are well under the 75% LTV number after the refi. I think your 20% for Capex/maintenance are pretty high, but you are going to want to keep things tip top shape to be an attractive option.
If EVERYTHING worked out the way you wanted, I think the deal would be a decent one, giving you $150 a month. However, I think relying on such a fickle tenant gameplan makes it not a good deal. One single month of vacancy would wipe out your yearly profits.
Way too thin for a buy & hold. Bad area, won’t be a ‘set it/forget it’ property. Minimal appreciation in Bakersfield compared to elsewhere.
Try looking at Tehachapi area if you are near Bakersfield.
@Richie Thomas a few notes on your calculations:
1) Given that its a single family the vacancy rate can be a little higher, but the city wide vacancy rate is pretty low. I think you should have an overall vacancy rate that is much lower than 10%
2) Electricity, Water, Sewer should all be removed because the Tenant will be paying for those utilities
3) Garbage should be included in the tax bill instead of outside expense
4) Property management can be brought down to $60/single family home
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