Kansas City, Missouri Rental Property Analysis HELP!!!

[Destin E. Thomas]

Hello,

Rookie investor in need of some guidance with regard to a potential long-distance rental property in Kansas City, MO. My aunt is going to be selling her Single Family Home (currently off-market) and wants about $220k-$225k. It is in good condition and she says just needs a new roof (I’d still get it inspected), and given the closest comps in the area are about $260k at minimum, I inquired about buying it from her (for both the discount and the immediate equity of about $35k-$40k).

This would be my first long-distance rental property (and my first property in general), so I’ve run the analysis numerous times and just can’t seem to make the numbers work (even with the discounted price). For those of you experienced investors (and even better anyone based out of Kansas City, MO or with experience investing in this city), do you have any opinions/suggestions/critiques about the inputs I used for my numbers (below)?

P.S. I used a lot of conservative rules-of-thumb figures (given that I am a rookie) in my numbers obtained from Brandon Turner’s books, as well as from podcasts, webinars, blog posts, and YouTube videos of other investors, until I gain the experience to know how to calibrate my numbers organically.

P.P.S. No seller/owner financing because she is getting too old and sadly might not be around much longer, so she's not going to want to postpone cash payout.

If anyone can provide any input, it would be very much appreciated. Thank you!!

Purchase Price: $225,000

Closing Costs: $5,625

Misc. Costs: $2,500

6-month Cash-Reserve: $9,204

6-month Holding Costs: $6,000

Approx. ARV: $260,000

Approx. Repair Costs: $23,000

Down Payment: $56,250 (25%)

Interest Rate: 3.8125%

Points: 2%

Loan Term: 30 Years

Approx. Gross Rent Income: $1,743

Property Taxes: $277/month

Landlord’s Insurance: $238/month

Repairs & Maintenance: 10%

Vacancy: 8%

Capital Expenditures: 10%

Property Management Fees: 10%

Electricity: $0 (tenant to pay)

Gas: $0 (tenant to pay)

Water & Sewer: $0 (tenant to pay)

HOA: $33

Garbage: $10/month

Lawn Care: $100/month

Pest Control: $50/month

Snow Removal: $50/month

[Grant H Willcott]

Destin,

First off am not trying to rain on your parade this is just how I see it. Do you think your ant will you ant let you get the house ready and have it rented before you close on the house? This would eliminate the holding cost. In Kansas City we do not get that much snow I would say that you could count on shoveling at most 8-10 time a year not requiring $600 in annual cost. Here you can count on mowing at most 8 months a year not 12. Just wondering why would you not put the yard and the snow removal on the tenant? On the pest control bugs are not that bad unless the house has termites already, you might look to having this done twice a year. I have this done in the fall and spring and pay about $75 each time. If you are looking to BRRRR this proprity there is not enough equity and you are going to have 60 – 70K in capital locked up in the propriety, that is ok if you have enugh to do the next deal.

I do not see 35k in equity I see more around 7k in equity if everything goes as planned.

PP: $225,000

CC: $ 5,625

HC: $ 6,000

RHC: $ 23,000

Total $253,625 

Looking at the monthly income it looks like you are about -$460/m with the numbers you provided I assumed that you mortgage payment is about 780/m. So, the monthly income would change depending on your mortgage.  Let me know if I am way out of wack. Best of luck