Jacob, first of all, welcome to San Angelo, and GAFB. I am native to San Angelo for most of my life and now am a Firefighter and Real Estate investor of this great community. Glad to have you here for the last two years.
Next, I like the idea of the business model, BPRR(R)R: Buy Primary, Rent, Renovate, (Refinance), Repeat.
This is actually exactly how our business model is designed, and we are in San Angelo. We do it with the slight modification to the BRRRR model so we can get the best rates and terms for our loans. We purchase a livable home four our primary every year, and have been doing so for the last 6 years (we have 5 properties now). We search for a primary residence that is livable, but could use a facelift, so we search out properties that have been on the market for an extended period of time that have not moved. We then move in to satisfy the primary residence status, maintain the home while doing very minor updates. Put the home on the rental market, then begin to do the more significant updates (for tax purposes, this is what we were advised by our CPA). We actually have not used the refinance option to date as our rates and terms have been outstanding since we started, in addition to my wife being risk averse and not wanting to pull the money out. Then we move on to the next house. With this model, we now own 5 homes with a 6th vacant property with which we will consider developing.
We have also, on our most recent acquisition, picked up a home with creative financing, a mortgage assumption with a 3% interest rate and less than $20k total closing including paying the seller’s realtor ($6k) to “facilitate” the deal (to ensure that it was presented appropriately to their clients), paying for the seller’s agreed upon “equity” in the property ($11k), and all of the mortgage company’s and title company’s transaction/document fees ($3k).
Finally, in response to your statement that most of the information you have acquired refers to purchasing a home for a specific strategy, I would say you are correct! Then, I would encourage you to see that, if you do decide to get into real estate and choose the strategy of moving into a home with the idea in mind that you might turn it into a rental property after establishing it as a primary residence, you, in fact, have a specific strategy for which you will be analyzing future purchases. So think of it and run your designated strategy as a business, because that’s what it should be. However, keep the other “suggestions” that you have heard and learn on other strategies and keep them in your toolbox in case you need or want to change your business strategy.
Now, in answer to your question, about analyzing a property that you already “own,” I would offer you a few suggestions.
First, I would suggest that you analyze the property based on your current expenses. In other words, analyze the property based on your current PITI (principal, insurance, taxes, interest), and estimate what your other expenses would be (I would suggest using the BP calculator if you haven't used it yet). Then you could either talk to a property management company or research rental comps in your area. Full disclosure, I have yet to use a local property management company here in San Angelo, but I have heard many great things about Aaron Nelson's expertise if that's the route you would like to go, and I do see that he has already responded to your thread. Aaron is also a facilitator of a local meetup in San Angelo which can be found on Facebook: "San Angelo Real Estate Investor Network." You could also use Rentometer, but I have actually had little success with their analytics for San Angelo area as their data points are generally at the lower end (in terms of price points) from what I have seen, expect, and have received in my rental areas.
Second, to get an idea of if the property is continuing to perform as expected, I would suggest for you to run an analysis on your propert(y/ies) periodically. This means introduce the property tax and insurance increases, analyze the expenses now, including any refinance fees or changes in P&I. The goal here is to make sure that the property is performing and continues to perform to the standard at which you expect. If not, maybe it’s time to move on from this property and move your investments into another asset.
Finally, I would suggest to analyze the property as if you were to purchase it today as a rental property and at today’s interest rate and expenses and with the income produced today (in other words, what you are charging in rent). This will give you a good idea of the area you are investing in. Has the area you are investing still continue to perform to your standard? Would it be wise to switch your business strategy? Do you need to check comps in the area? Have you not been keeping pace with this area market rents or have you been having a hard time getting tenants because you have surpassed the market rents?
Long post, I apologize, but I hope you can find some benefits from it! Please feel free to reach out and I will be happy to help anywhere I can.
Welcome Regards,
Joshua Kemp
