This is a 0 down VA finance. Strong B area. Believe interest should be closer to 3% and the price negotiated down. $200 / unit should be achieved but looking negotiate price down to achieve $250 per unit. Ideas / realistic?
@Mark Beeson , you ran the numbers with all the units rented out. You should also run them with living in one unit as you'll have to owner-occupy (for a while anyway) to use your VA benefit. This is a beautiful looking property. I'm a sucker for those old craftsmans, too. As far as the rest of your analysis:
- Closing costs are super high. I'd expect them to be 25% of that. Where did that number come from?
- Vacancy might be a bit low. I figure 8%, but this is super local.
- CapEx and repairs will probably be higher--15% combined. Being it's 100 years old, it could definitely be higher, even with the recent renovations.
- What about snow removal? It snows in Kansas, right?
- Any house electric?
- Budget for management (10%), even if you plan to self-manage in the beginning. This may be the deal killer. I don't see how you cash flow.
In the end, I don't see how this cash flows. If you want to live here and build equity/reduce living expenses, it may be worth considering. Of course, you an also try to get the place for a lot less. It's been on the market since August.
Thanks Jaysen. Yes, will definitely live one unit for a year but cash flow after that is critical. It is an investment property and I need to make a smart deal.
VA charges a 3.5% funding fee, so that's why closing is so high.
Yes it does snow in Kansas. Usually not much but we can get some real doozies.
Overall, I agree this is not going to work. Just learned the landlord pays all utilities - unbelievable. My goal was to get $750 cash flow - aint gonna happen. Management fee & utilities knock it out of any consideration.
I have used the rental calculator on a bunch of properties - I will keep looking!
Hey @Mark Beeson . I agree this might not work because of the utilities situation, but a picturesque property like this would do very well on a photo-centric platform like Airbnb. How much time is left on those leases, and when does each lease expire?
After each lease expires, you could turn it into a short-term rental. Check airdna.co for average revenue per night, slow vs. busy season, and other info specific to Kansas City. As a former Airbnb host, I'd assume the property's income would go up by a significant percentage. That gives you the financial elbow room to hire a PM, pay rentals, and even furnish the place (which you'd need to do in order to host it on one of these platforms). Kansas City may not be a tourist hotbed compared to LA or Miami or something, but you'd be surprised how many smaller cities are booming in the short-term rentals market.
Check out Kansas City's short-term rental laws first, though, since many cities are starting to crack down on these rentals. And if you do decide to go for it, be up-front about the neighborhood (i.e. the liquor store across the street, the fact that it's on a busy thoroughfare, etc).
Oops, looks like I confused Kansas City with Wichita. Sorry about that, hope that's not a huge faus pax in your city haha.
Also, one thing I forgot to mention above- Airbnb turnover would obviously be quite high compared to a typical tenant, so your Airbnb co-host fee would probably be something like 20% of the revenue. So that would be comparable to a 20% budget for a property manager. However, if I were a betting man, I'd say your revenue would almost certainly see a greater-than-20% increase with Airbnb, probably much greater. Again, check Airdna.co for more info. I have no affiliation with them, I just think they make a great product for short-term rental investors.
Alternately, I see this property is 1 mile from Wesley Medical Center and 2 miles from the Bob Dole VA Medical Center. You could also try renting to travel nurses on travelnursefinder.com. This would be a similar play to the short-term/Airbnb rental idea, and you'd also need to furnish the property. But the turnover would be less so the property management fee would be less as well. Travel nurses tend to pay above-average rent prices because their work contracts last between 10-13 weeks. Here's their listings page for Wichita, which shows one 2-bedroom going for $1,875 per month, and a one-bedroom going for $900/month. If you were conservative and priced each of your units at $1,400, that's $4,200 in income per month vs. your current budget of $3,100. Travelnursefinder.com's parent company, Furnishedfinder.com, has a handy stats page where you can see free data on their volume of Wichita inquiries. It's not much data, but it's better than nothing.
Thanks Richie. Looked at the website - very interesting. It's a whole new area of learning and investing. More likely to consider with a smaller property although your right about it being picturesque which could spark more interest. Can you share any specifics about your experience in San Francisco with airbnb?
Sure Mark, although I actually hosted in NYC, not in SF:
-I hosted for a little over 2 years, in a large studio which I had converted into a 3-bedroom.
-It was basically a house hack, and it was kind of my only option besides commuting an hour-plus each way to work.
-My average rate per night was $120 in the summertime and $85 in the wintertime, and I almost always had 90%+ occupancy.
-My rent was $3,240, a slow month for me was $5,000 in revenue, and a good month was $7,000.
-I picked my neighborhood because it was very touristy, and I had a professional photographer take pretty good photos so that my listing would stand out.
-It was surprisingly low maintenance as a live-in host. I pretty much just changed over the rooms (changed the sheets, vacuumed and made sure no belongings were left behind, etc.), and did the laundry. Everything else was stuff I'd have to do anyway (i.e. clean the shared rooms). I didn't make breakfast for the guests or do anything like that.
-The guests and I would often run into each other. Some guests were super-chatty and some just wanted to do their own thing.
-I found the best way to filter out problem guests was to be very up-front in my listing about the downsides of my apartment (distance from the subway, age of the building, etc.) so that people knew right away whether it was for them or not.
-If I had to do this over again, I'd put that information in the photos section, since many guests just look at photos (and oftendon't read the full property description) before booking.
If there's anything else you want to know, feel free to DM me.