Analyzed Deals

Run your own analysis on this particular property. Use our new, FREE Offer Generator real estate investor tool to change our assumptions and use your own.

We have analyzed this deal to see how this particular four-plex in Aurora would be as a rental property.

Where is this property?

It is located in Aurora, CO. The property address is kept private to preserve the deals for our members. To work with our preferred investor friendly real estate agent/broker for this deal, contact us about Deal #3035 and they can give you the full details about this property and help you in purchasing it. This particular property was submitted to the Denver Real Estate Resources Website featuring real estate investor articles and local deals.

How did we find this property?

We found this property from one of our real estate investor friendly agents/brokers or one of the real estate investor wholesalers we know in the Aurora area.

Learn to find motivated sellers using marketing in Buying Houses using Broadcast Media. This CD is included as part of the 68 CD Ultimate Real Estate Investor Package that you get when you purchase any house we promote on the website through our recommended real estate agent or broker. To work with our preferred investor friendly real estate agent/broker for this deal, contact us about real estate Deal #3035 and they can give you the full details about this property and help you in purchasing it.

The Story

Before we get into our full analysis, here is some of the interesting story for this particular deal:

This property is not a foreclosure, it is fully rented and ready to cashflow. The seller is motivated. The location is close to Stapleton and Fitzsimons redevelopments.

Read Getting Rich in Real Estate - Full Time Job or Fast Track to Wealth?

Property Details

• Bedrooms: 5
• Baths: 4.00
• Square Footage: 2,250 (see square footage estimates for info)
• All information is deemed reliable, but is pulled from tax records, real estate agent, zillow or the seller.

Income

• Gross Rent: $2,025/month (see Rent Estimates for more info)
• 6.00% Vacancy Adjustment: $122/month (see Vacancy Estimates for more info)
• Net Rent: $1,904/month

Expenses

• Management: Self Managed (we have assumed you will manage the property yourself for this analysis)
• Maintenance: $76/month (see maintenance estimates for info)
• Utilities: $0/month (tenant pays)
• Taxes: $168/month based on $2,020 per year
• Insurance: $117/month (based on an estimate of $1,400 per year)
• Other Expenses: $0/month

Net Operating Income: $1,542.36/month

Repairs Needed

The estimated repairs are unknown for:

• Repairs TBD (cost unknown)

All repairs are merely speculative estimates based on what the seller (or agent) has told us at this point. Before buying this house you should have it inspected and get quotes for actual repairs found.

Most We Can Pay For This House Based On NOI

• Investor Interest Rate: about 6.500% (see Interest Rate Estimates)
• 30 Year Amortization Fixed Interest Rate
• Principal and Interest Payment = NOI = $1,542.36
• Max loan for 100% financing with that payment: $244,018 minus closing costs and any repairs

Estimating Value

• Seller claims the current as-is value is what they are asking.
• Seller is asking $185,000.
• You should analyze the property to determine your offer, but we will use the full asking price for our analysis.

Purchasing The House

Based on getting our full price offer accepted, that would be our purchase price. We will use that in our calculations below.

Nothing Down

• 100% Financing
  • 100% financing for investment property is very difficult in our current credit market. There are ways to purchase property with no money down, but you will want to discuss these more creative methods with your lender and the real estate professional we can refer you to when you request information about this deal.
  • Hard Money Then Rate and Term Refinance
    • We can sometimes buy a house with a hard money loan and then immediately do a rate and term refinance to eliminate the really ugly 20% second mortgage that we describe above on the 100% financing analysis.
    • To do this, we need to buy the property well below 80% loan to value.
    • When you factor in our offer price of $185,000 I do not think this property would work for this, but you can learn about this strategy from Collect $8,000 Buying Real Estate Rentals. This particular house would be at about 100.00% of what the seller estimates value to be.

10% Down

• If we purchase it for $185,000, then a 10% down payment would be $18,500.
• Likely, we would then be financing 80% (that’s $148,000) on a first mortgage and then 10% (that’s $18,500) with a second mortgage with a higher interest rate.
  • Principal and interest payments on a $148,000 30 year fixed rate loan at 6.500% are: $935 per month
  • Principal and interest payments on a $18,500 30 year fixed rate loan at 9.000% are: $149 per month
  • That would leave us with a positive cash flow of $458/month when we subtract it from our Net Operating Income calculation which takes into account a reserve for maintenance and a 6.00% vacancy rate.
• Return on Investment Estimates
  • IMPORTANT NOTE: These can change if any assumptions change.
  • For putting up $18,500 as a down payment you’d see the following returns from the following benefits:
    • Cash Flow
      • $458/month times 12 months = $5,497 per year
      • $5,497 per year/$18,500 invested = 30% return on investment from estimated Cash Flow
    • Depreciation
      • $185,000 purchase price with 10% estimated land value leaves $166,500 for the value of the structures that we can depreciate
      • $166,500/27.5 years = $6,055 per year
      • Assuming a tax rate of about 33%, then a third is the benefit from depreciation
      • $2,018 per year/$18,500 invested = 10.91% return on investment from Depreciation
    • Principal Paydown
      • $148,000 loan pays down about $1,332 in the first year
      • $18,500 loan pays down about $167 in the first year
      • ($1,332 per year + $167)/$18,500 invested = 8.10% return on investment from Principal Paydown
    • Appreciation
      • Assuming a 5% appreciation rate. How did we come with that number? See Appreciation Rate Estimates for more info.
      • Assuming the property is worth exactly what we paid for it $185,000. If the appraisal comes in lower then we will be forced to go back to the seller since it will affect our ability to get a loan on the property. If it is higher than our numbers will likely be much better.
      • $9,250 per year/$18,500 invested = 50.00% return on investment from Appreciation
    • Total from Cash Flow, Depreciation, Principal Paydown (first and second mortgages) and Appreciation
      • ($5,497 + $2,018 + $1,332 + $167 + $9,250)/$18,500 = 98.72% return on investment

20% Down

• If we purchase it for $185,000, then a 20% down payment would be $37,000.
• We would then be financing the balance of $148,000
  • Principal and interest payments on a $148,000 30 year fixed rate loan at 6.500% are: $935 per month
  • That would leave us with a positive cash flow of $607 when we subtract it from our Net Operating Income calculation which takes into account a reserve for maintenance and a 6.00% vacancy rate.
• Return on Investment Estimates
  • IMPORTANT NOTE: These can change if any assumptions change.
  • For putting up $37,000 as a down payment you’d see the following returns from the following benefits:
    • Cash Flow
      • $607/month times 12 months = $7,283 per year
      • $7,283 per year/$37,000 invested = 19.68% return on investment from estimated Cash Flow
    • Depreciation
      • $185,000 purchase price with 10% estimated land value leaves $166,500 for the value of the structures that we can depreciate
      • $166,500/27.5 years = $6,055 per year
      • Assuming a tax rate of about 33%, then a third is the benefit from depreciation
      • $2,018 per year/$37,000 invested = 5.45% return on investment from Depreciation
    • Principal Paydown
      • $148,000 loan pays down about $1,332 in the first year
      • $1,332 per year/$37,000 invested = 3.60% return on investment from Principal Paydown
    • Appreciation
      • Assuming a 5% appreciation rate. How did we come with that number? See Appreciation Rate Estimates for more info.
      • Assuming the property is worth exactly what we paid for it $185,000. If the appraisal comes in lower then we will be forced to go back to the seller since it will affect our ability to get a loan on the property. If it is higher than our numbers would be much better.
      • $9,250 per year/$37,000 invested = 25.00% return on investment from Appreciation
    • Total from Cash Flow, Depreciation, Principal Paydown and Appreciation
      • ($7,283 + $2,018 + $1,332 + $9,250)/$37,000 = 53.74% return on investment

For more information on this particular deal, please contact us about real estate Deal #3035.

Until my next post…

James

This entry was posted on Friday, August 29th, 2008 at 8:38 am and is filed under Denver. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.