@Stone Saathoff are you buying or selling. Not very aggressive on your soft costs. Vacancy of 5% is the tenants staying an average of 20 months. With covid some landlords could be out 4-6 months of rental income which your vacancy analysis would be 10 years at 6 months lost income. Capex is way low. Brand new floors. assume 1000 sf of flooring. 10 year life span. My area it is $6 sf to replace. $6000/10 years/12 months in a year=$50 per month for 1 item. You won't be able to replace roof 25 year life span, appliances and hot water heater 12 years life span, hvac 20 year life span, bath and kitchen remodel 20 year life span, etc. I use a minimum of 10%. PM must not charge rent up fees. Even at your 20 month turnover and 1 month rent up fee, that is the equivalent of 10%. 2 months lost rent/20 months = 1/10. Insurance seems high for a rental property.
@Stone Saathoff are you buying or selling. Not very aggressive on your soft costs. Vacancy of 5% is the tenants staying an average of 20 months. With covid some landlords could be out 4-6 months of rental income which your vacancy analysis would be 10 years at 6 months lost income. Capex is way low. Brand new floors. assume 1000 sf of flooring. 10 year life span. My area it is $6 sf to replace. $6000/10 years/12 months in a year=$50 per month for 1 item. You won't be able to replace roof 25 year life span, appliances and hot water heater 12 years life span, hvac 20 year life span, bath and kitchen remodel 20 year life span, etc. I use a minimum of 10%. PM must not charge rent up fees. Even at your 20 month turnover and 1 month rent up fee, that is the equivalent of 10%. 2 months lost rent/20 months = 1/10. Insurance seems high for a rental property.
Wholesaler, Rehabber and Landlord · San Antonio, TX · Member since 2014 · 2k+ posts · 2k+ votes
6y
So are you trying to wholesale this property or are you actually buying this property yourself??
If you are actually buying this yourself, I would say that there is a reason that the appraisal district has the property valued at 60k+. It is probably worth somewhere around that price. How you would get 120k valuation astounds me. It depends so much how good of a rehab was done. Are there $40 ceiling fans? Was the house rewired? Any new plumbing? Also, was the work that was done on the house permitted? THAT is a big one.
Investor · San Antonio, TX · Member since 2019 · 576 posts · 307 votes
6y
@Tim Herman, The property was literally just rehabbed this year. Shouldn't be any repairs in the near future. Already rented on a TREC lease until the end of Feb 2021. Flooring here in San Antonio is more like $3.50 per sq ft on the high end.
@Rick Pozos I do currently have this for sale, but this isn't a sales post. I wanted some genuine opinions.
Valuation is based on the price of sold rehabbed comps in the neighborhood. This one has just been rehabbed and likely hasn't had the assessed value go up yet on the tax records for that reason.
If you'd like the address feel free to message me, would prefer not to blast publicly.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
6y
@Stone Saathoff, can you explain the purchase and ARV numbers? I understand you're a wholesaler and identify distressed/under-valued properties, but how is $20k of value being created with no improvements? If someone pays $85k for this property, it is, by definition, worth $85k.
As far as your analysis:
CapEx and Repairs are a bit low. I underwrite to 15%. I understand that it's been renovated, but over the long term all of the numbers even out.
Insurance and Taxes both look very high. Have you confirmed with a local insurance agent and the local assessor's office.
You've left out debt service. I'm sure you want to sell to a cash buyer, but they will likely finance at some point and will need to take that expense into account.
Management will likely be 10-12%, unless the buyer already has a substantial portfolio.
Using your insurance and tax numbers this place would only cash flow ~$75/month after debt service. I certainly wouldn't jump on this deal for that kind of return. Those taxes are killing you.
I usually ballpark insurance, so that may be high. Taxes are spot on, and that is actually below average for the area.
The 20K in value is by this being purchased cash, off market. He could easily list on the market for 20K higher if not more. We got this deal because my team has a relationship with the seller.
Real Estate Investor · San Antonio, TX · Member since 2017 · 40 posts · 12 votes
6y
Hey Stone! Ill take a stab at this. The numbers look decent, IMO. Its an 85k property bringing in a proven 950 a month. Thats pretty much a win right there, again, IMO. The ARV may or may not be accurate but if its in an appreciating neighborhood and was repaired correctly I could certainly think of worse things to do with money.