Deal analysis help

[James Haffner]

Hey everyone! i'm in need of your professional opinions. Any help would be great!

We managed to find a deal in the middle of Everett, Wa about a 5 minute walk away from the stadium, and a 5 minute drive from the community college. If your familiar with the area it's on Wetmore avenue.

The property was built in 1910.

its aprox 2300 square feet. 4 bed/ 2.5 bath

2 car garage.

The last owner of the property tried to make a duplex out of it so it has 2 kitchens. One of them needs to be ripped out because it's unfinished and honestly doesn't make any sense. it also has a basement room that I didn't get to look at, and an attic type room that's carpeted and has stairs going to it. The home has a lot of little quirky things that are strange and unlike anything I've ever seen. 2 closets in one room, a bedroom next to the kitchen, etc.

It needs a lot of work. Prior inspection, I know it needs paint in and out. Replaced floors (probably pergo) There are some rotted boards on the deck, and a huge chunk of wall that was taken out in one of the upstairs rooms. It needs some new windows, but some have been replaced. It needs to be cleaned with a pressure washer. Some of the floors slump and slant in a funky way. IDK if that's because it's old or bigger problems that IDK know about. I estimated about 40k in rehab costs and 5-6 months of rehab before we could rent it.

Fortunately, my father lives in the area who would be able to help manage some of the contractors because my fiancée and I are pretty strapped on time and in between det's constantly.

Numbers (the important part!)

The home is listed for 185k. We want to offer 170k

After a full rehab we are seeing homes this size in this area going for 280k-300k.  

But, we would like to rent it out for cash flow. When using the rental income calculator adding in 9% for a rental manager,  7% for capex, and paying $500.00/Mo. in utilities & insurance. We were able to come up with a cash flow of $300-400 a month charging a $2200/Mo. rent. I feel were using pretty conservative numbers, if your from Everett please let me know if I'm of my rocker!

Everett has an expanding community college that is also expanding there campus to take in college students from a near by University. They have seen a consistent 15% increase in students since 2011 when they had 20,000 students go through there door. The campus has tripled in size since I graduated in HS. So our plan is to offer the home to college students, renting out per room, if we did that we would be able to charge higher rents than what was listed. But if that wasn't within the confines of the law, we would lease it out to a group of 4-5 students who would pay a total of $2200/Mo. in rent and probably split the utilities up so were not paying for all of them. But our goal is to charge a higher rent, and offer the home for students. But there is a Navy base, and Boeing in the area if that doesn't work out. I feel the home is a bit to quirky for a family, but maybe I'm wrong.

I know this is long winded, let me know what you guys think.

Thank you!

[John Arendsen]

I'm not from Everett but I did own some investment properties in Sequim which has a pretty mild climate compared to Everett. Two of the homes we owned as rentals were circa '10to'20 homes. 

We had nothing but problems with them and after 10 years of dealing with structures and infrastructures that old and dated we finally gave up and sold them just barely revisiting our initial capital investment.

Older properties, especially like the one you're describing here, can be a total nightmare and gofer hole you just can't seem to fill up with a hose. You will be spending money on it every time you turn around not to mention the amount of actual hands on that it will take and from the sounds of things you don't have that kind of time.

Finally, it sounds like there was a whole lot of ding batting going on with the home which is another blatant red flag that would send me sprinting the other way as fast as I could. As a general contractor for the past 3 decades I can tell you that trying to work with building departments on "as builts" can be a horrendous never ending nightmare.

Just my 3 cents worth adjusted for inflation. LOL!