C- Property in KCK -- Help me Analyze this one.

[Christopher J Lemmon]

BP investors,

I have one 4 plex in this part of town, 66102, and I am looking at a SFR in 66101. The community is mostly minorities. This particular section that I am looking at a SFR in is more Hispanic. But there are folks from all over the world in this community. I have some experience because I lived and worked in KCK for 2 years before moving out.

Deal 

$40,000 -- Price

SFR -- 4 bedroom, 1664 sqft. Updated plumbing, HVAC, and electrical in the last 10 years. Inside looks nice and I have toured it. Only needs a little paint and patching of a few spots on the walls. The kitchen and bathrooms have been recently remodeled, so I don't plan to change them anytime soon. It has 2 floors, 1.5 bathrooms. Central air and heating.

I am planning to do a conventional investment property loan at about 5.5% with a 20% down payment. 

I am planning on a payment of $400/month escrowed. Taxes are $1116 annually, insurance I have quoted at $1400 annually.

I am relatively confident that I can rent it for $750. Rental comps on Craigslist for KCK are showing offerings at anywhere from $750 - 800. My apartments in my 4 plex are about 700 square foot a piece I rent them for an average of about $500 a piece. 

I plan to have it inspected before going through the purchase for $600

I will be putting down $8000 for a down payment. I estimate $2800 more in closing costs and loan costs. I am planning to put about $2000 into it for upgrades and painting. 

In the end I want to rent it for $750 (Rent) - $400(Mortgage & Escrow) = $350 NOI.

$350 x 12 = $4200

$1200 = Repairs and Capital Expenses for the first year.

I imagine it will put out about $3000 worth of profit in rent in the first year.

Total investment $13,400. 

Initial profit $3000. 22% return or around about. I am new to how to calculate all that. I will self manage initially because I only have one other property. 

Does anyone else have any thoughts on C- SFR investing?

I have been looking for a multifamily in the area for a while and there just are not that many, or the people who have them seem to never sell them. The price is higher and means I would have to save longer to get one of those, plus there are just not many for sale. Maybe because they are good money makers for the owners! HA! I am clearing about $1300/month on the 4 plex I have right now, and I only bought it for $53,000 in 2013. There just are no other deals that good out there, in Kansas City, Kansas that I have found. My other place needed a lot of work when I got it, but it had renters in it. I only deal with the Kansas side right now and have no interest in traveling over to the Missouri side.

I would appreciate advice from anyone familiar with the Kansas City market and or dealing with C- grade properties! Thanks BP community. 

[John Leavelle]

@Christopher J Lemmon

Howdy!

Have you determined comps for that area?

The basic difference between CapEx and repairs is time. How often do you have to do it and how long will it last.

A few examples: 

Replacing a small section of roof shingles is considered a repair and deducted that year. Replacing the whole roof is a CapEx and depreciated over many years.

Patching and painting a wall in one room is a repair. Complete new Exterior paint job is an improvement to the property and considered a CapEx.

Fixing steps on a wood porch stairs is a repair. Replacing the stairs with cement or metal stairs is a CapEx.

Hope that helps.  :)