A rudimentary first analysis of a rental home in DFW, Texas.

[Zachary D.]

So, since I live abroad, I thought I would run some numbers on a run down place in my hometown. I hope everyone can pull back the curtains on this property. I feel like I'm barking up the wrong tree because this definitely needs a lot of repairs. But, the gap in cost and ARV seems attractive.

Property Features:

Address: http://www.zillow.com/homedetails/821-Running-Cree...

3 Bedroom 2 Bath

1986

Estimated ARV: 114,000 ( Based on redfin.com and zillow.com research )

Estimated Rent: $1300 / Month ( Based on similar criteria from around the city. )

Selling Price: 77,500

My offer: 70,000

Repairs: 7,500 ( arbitrary )

My down payment: 14,000

Payment (Including taxes, insurance, per willow) $501

Closing costs: not assumed

Commissions: not assumed

1. Determine if the selling price is reasonable considering the bad condition.

Looking at the follow numbers leads me to believe that this is a possible deal.

My offer: ( ARV$114,000 - 70%Rule ) - $10,000(Repairs) = Appx. $70,000.

2. Determine Cash Flow ( Based on area average rent and 50% rule ).

($1300 The normal rent in the area / 2 ) - $500 Mortgage = Appx. $150 of income.

3. Determine the cash on cash return, or how much of my downpayment I earn back in a year.

Yearly Income / My down payment = Amount of downpayment recovered yearly.

 $1,800 /  ($14,000  + $7,500) = 8% of the down payment and initial repairs recovered each yearly. (CoC)

Conclusion

If I used the rules correctly, I think I might have a ballpark outlook on this property as a single family rental. I can't use the BP calculator anymore and I'm not ready to go pro, so this is what I have for the moment. 

If I included the above not assumed commissions and fee, I feel like the deal might be fruitless. :( sad face.

Any insights would be helpful!

[Jackie Lange]

Keep in mind two things

1.  All homes in Arlington Texas either have or will have foundation problems.  Foundation problems are very expensive to fix.  Figure $500 per pier - assuming double shaft pier.  The foundation work alone can cost you $10,000.

This house probably has foundation problems.  The foundation problems happen in the DFW area when the soil is not kept at a constant moisture content.  When it get to 100+ in the Texas summer, it is necessary to water your foundation every day to keep the foundation from cracking.  If the house does not have a working automatic sprinkler system which can be set to water automatically, you will need to either install one or at the very lease have soaker hoses put around the perimeter of the house and set up with an automatic timer.  Most tenants will turn off the automatic timer to avoid the very high water bills in Arlington.

If you decide to write a contract on this property, include in the special provisions area that you want a structural engineer to inspect the property.   

Do not, I repeat DO NOT, get a foundation company to inspect the property because they are in the business of selling piers and will always recommend foundation work.  If 10 foundation companies inspect the property you will get recommendations for anywhere from 10 to 40 piers.  If they know you are not local, they will probably lean more towareds the 40 piers.  

2. Property taxes are higher in Arlington than any other city in the DFW area.  You're looking at 3%+ on the value.