All Forum Posts by: Kyle Carpenter

I guess I should have mentioned this house is sitting on a slab for no apparent reason so the duplex thing won't work. I talked to my local realtor today to feel her out about rental rates and she said 600-650 for a nice place. The thing is I think she is considering nice a decent house built in the 1920s. She doesn't know about this house because it is a private seller that's not advertising. In my opinion this house should be 700 all day by looking at the comps. Is it going to be harder to find a tenant because I would be charging more? Do tenants actually take into consideration what the difference between and older house and this one would be? Or do they pinch penny's. The house is in Wapello iowa right on the edge of town so it almost feels rural. It's still on city gas and water but has its own septic that the current owner replaced already which is great. The realtor kept mentioning apartment complexes, like 4 unit places as the way she thinks would be a better option. It is obvious why she says that purely on cash flow. There aren't many in town for sale and they are more like 150k and rent for 475 or so for 5 units. I know those numbers work but do you guys worry about tenant turnover? Everything I read seems to say that apartments are nice but they become more of a pain to manage instead of a single family with a good chance of a long term tenant. I know the time is now to get it but I'm driving myself crazy looking at different properties! There is even a downtown apartment in Wapello asking 30k with 3 units. One is ready to rent and two are not. Cash flow looks great on it after rehab but I also don't want to be a slum lord!! Please convince me to make a move! Haha

Some more back story on the house. The current owner bought it a year ago and he just inherited a house from his grandparents estate. He bought the house for 63000 and is willing to sell it to me for 65000. After he bought it he painted all the walls, installed a fence, and laid 3/8 hardwood throughout almost the entire place. I'll have to wait for the appraisal but I figure I'll have instant appreciation. Would it be smart to advertise for 800 and risk taking longer to get a tenant? Or try 700 because I know that average rent in my area is 6-700 for house in a little worse shape and older than this one. I also talked to a tax person and it sounds like you depreciate the purchase price over 27.5 years instead of just the assessed price so that helps. Do you guys think that having a higher rent leads to better tenants in an area that generally charges less? Obviously my biggest fear is a bad tenant. It is what scares me the most when I try to analyze this deal.

hello all,

I'm from southeast iowa and I was hoping to run some numbers in front of all the investors on BP!

I'll get right to it. The house I am looking at buying is a 1200 sq ft house with 2 bedrooms, 2 bathrooms, and a 768 sq ft garage all built in 2000. The house is sitting on 0.4 acre lot.

The house is selling for 65000 and I believe rent would be 650 to 700 but I've been running the numbers at 650. The 2% rule shows me that I am only at 1%, but I know that could vary with the area you are in. I'll make a list of expenses I think I will encounter.

Purchase - 65000

Rent- 650

Taxes monthly - 105

Insurance monthly- 62

Vacancy 5% - 32

Capital expenses / repair 5% - 32

Mortgage - 278

All that puts me at 509 expenses versus 650 rent to be at 141 cash flow monthly.

I have calculated the CoCR a couple different ways because I am certain that the house is rent ready now but I also figured it with some rehab expenses just in case I find something.

141x12= 1692

1692/16000(down payment plus closing)= 10.5% CoCR

1692/18000(down payment, closing, and 2k rehab) = 9.4%

Like I said before 650 seems like the safe route for potential rent. A couple other things I haven't mentioned are that the house is assessed at 64610 and the interest rate on the mortgage is 4.5% 30yr.

What do you all think? I'm trying not to confuse myself so much that I go crazy. I honestly want to do this so bad but I always seem to find a reason not to and the reason on this house for me is the lower CoC return. I think I would like to see closer to 15% but what do I know!

Sorry for rambling. Let me know what you think! Thanks!

thanks for the replies!

I will be managing myself so I will be taking care of snow and grass depending on whether the tenant is up for it.

The insurance I quoted was for replacement cost.  I know some people say to just insure for dwelling value but it was only $11 cheaper per month!  I suppose that will add up fairly quickly. 

The 8.33% for vacancy is probably a smarter number especially since there is no tenant yet.  My area also has limited houses that have the purchase price this close to assessed value.  Speaking of that, I have been thinking of the tax incentives like depreciation and writing interest and things off.  My estimate is that the income from rent (7800) would be about a wash and I wouldn't get taxed on that income.  Am I crazy? I am meeting with a tax person tomorrow to discuss my plans.

As far as the capex, I was thinking I should really use the 18000 initial investment number for CoC because I definitely will me saving that money back with the cash flow. Does that make sense?

hello all,

I'm from southeast iowa and I was hoping to run some numbers in front of all the investors on BP!

I'll get right to it. The house I am looking at buying is a 1200 sq ft house with 2 bedrooms, 2 bathrooms, and a 768 sq ft garage all built in 2000.  The house is sitting on 0.4 acre lot.

The house is selling for 65000 and I believe rent would be 650 to 700 but I've been running the numbers at 650.  The 2% rule shows me that I am only at 1%, but I know that could vary with the area you are in. I'll make a list of expenses I think I will encounter.

Purchase - 65000

Rent-  650

Taxes monthly - 105

Insurance monthly- 62

Vacancy 5% - 32

Repair 5% - 32

Mortgage - 278

All that puts me at 509 expenses versus 650 rent to be at 141 cash flow monthly.

I have calculated the CoCR a couple different ways because I am certain that the house is rent ready now but I also figured it with some rehab expenses just in case I find something.

141x12= 1692

1692/16000(down payment plus closing)= 10.5% CoCR

1692/18000(down payment, closing, and 2k rehab) = 9.4%

Like I said before 650 seems like the safe route for potential rent. A couple other things I haven't mentioned are that the house is assessed at 64610 and the interest rate on the mortgage is 4.5% 30yr.

What do you all think? I'm trying not to confuse myself so much that I go crazy. I honestly want to do this so bad but I always seem to find a reason not to and the reason on this house for me is the lower CoC return. I think I would like to see closer to 15% but what do I know!

Sorry for rambling. Let me know what you think! Thanks!