I should start out by saying there's no good or ideal way to buy a property in one of the hottest markets that I don't reside that I have found thus far. I do keep an eye on it, but I don't have an agent anymore keeping tabs. As highly competitive as it is, it seems to me that a lot of houses are sold off the MLS. Buyers are plentiful and agents, I would assume, have a long line of buyers. Would love somebody's input on how they find deals in and around Pearl St & CU's campus. My thoughts below.
@Jason D. that's a very obvious point and factor in this. I totally agree. Do you pop the top, build a floor plan you want in the future and then put renter proof flooring, cabinets, paint, appliances, etc in and wait?
My thought is two-fold. (since I woke up from writing my original post late last night).
- One, this house has a back porch room that you could rent as a 3rd bedroom. I'll assume said room need new insulation on the walls and ceiling and probably new windows. Total cost $12K-15K. This could get the rent up to $2700. That's still way short to make this make sense, I agree. It does help if we hold it for appreciation.
-Two, we pop the top, make the house nice and try and get a family in the house at a higher rent near to $4400/month. That's probably too risky of a play, I agree @Teague Anderson
@Rocco Montana that's an excellent point about the proximity to beer bongs & late night party goers. In a perfect world, we would get permission to move along with permitting while in escrow. My brother-in-law works for a ROCK SOLID construction company so I'm hoping someone from his company would be able to give us a realistic timeline for permits, moreover costs. $150K is very light. I'm thinking more towards the $200 a sqft mark. I'm not trying to flip this house, but rather set up a property that we could later live in. 3-5 years from now money is going to be way more expensive my estimation. If I do choose to sell this house could appreciate another 25% if Boulder keeps rising. If we chose to renovate it we could have a good play to sell and take the profits into another house that might be in a better family neighborhood. The lot alone is worth $600K.
@Teague Anderson The $4400 rent is a bit high, I agree. Especially if we have to put the work into renovating it to get close to a $4400 renter. Let's say we held it for three years. We'd lose $1,400 a month. If the house appreciated 5% each year you'd have a house worth $752K. 5 years it's worth $829K. You'd be out $84K after 5 years and $50K after 3.
The broader question is...
If you desire to relocate to Boulder and live amongst the town, in town. How do you wisely play the market to work for you?
Some more realistic numbers:
| Purchase Price | $650,000 |
| % Downpayment | 25% |
| Interest Rate | 6.50% |
| Mortgage Term | 30 |
| Downpayment | $162,500 |
| Loan Amount | $487,500 |
| Yearly Principal+Interest | $36,975.98 |
| Monthly Payment | $3,081 |
| Expenses (Yearly) | $5,000.00 |
| Gas |
| Electric |
| Water |
| Insurance | $2,000.00 |
| Taxes | $3,000.00 |
| Other |
| Expenses (One Time Only) | $174,000.00 |
| Permitting | $50,000.00 |
| Design Fee | $20,000.00 |
| Real Estate Fee | $99,000.00 |
| Closing Costs | $5,000.00 |
| Other |
| Square Footage | 3,000 |
| Sale Price Per Square Foot | $550.00 |
| Total Sale Price | $1,650,000.00 |
| Building Cost per Square Foot | $250.00 |
| Building Cost | $750,000.00 |
| Holding Period (Months) | 22 |
| Holding Period (Years) | 1.83 |
| Holding Costs | $250,955.96 |
| Payoff of Mortgage | $477,232.58 |
| Counstruction Loan Interest Rate | 10% |
| Construction Loan Prinicipal and Interest | $893,198.23 |
| Construction Loan Interest | $143,198.23 |
| Total Profit | $28,613.22 |
| ROI | 1.8% |
| Annualized ROI | 1.0% |
Interested to hear what you guys think of the above numbers.
