Green Cleaning at Home Today I walked into the laundry room and pulled my cleaning bucket out from under the plastic laundry tub in the corner. As I peered inside it, I realized that there were no harmful or toxic chemicals in it, and thought […]
I searched the MLS for potential properties in Houston, Texas. My range was anything below $150,000 with five or more bedrooms. Lo and behold, I found a five-unit apartment building for $140,000. The screen shots below show you the search results, the property I picked and finally the web page where the listing came from.
My instincts tell me that a five-unit building with $140,000 price tag stands a good chance of having positive cashflow. Within NestVest, I save the property to my Favorites so I can analyze it properly.
We don’t know what the monthly rental income is. The MLS didn’t say. But NestVest queries Rentometer.com, which uses the zipcode, number of units and the number of bedrooms per unit to calculate what the potential rent might be. We know from the listing that this is a 5 unit building with five bedrooms so that’s essentially five one-bedroom apartments. We buy houses Houston projects the rental income in this area is $750 per unit or $3,750 in total.
When we return to the main screen, the Preliminary Cashflow is $1,371 per month. Um . . . that’s pretty good.
The Expenses are all based on estimates. Within NestVest Premium I can search Zillow.com to find out what the current interest rates are and also the monthly insurance payment and monthly property taxes for that particular zip code. I push the button and Zillow.com returns the values I’m looking for. When I go back to the Property Info screen, I can see the new estimated monthly cashflow is $1,546/month.
The interest rate seems low to me. For a non-owner occupied building, I can only assume the lender will charge more for the interest rate. Also because this is a Five-unit building, some lenders get funny about their lending with more than four units. Beware of that. Im going to change the interest rate to 8% just to be safe. Now I can see the new cashflow. is $1,318/month. Cap Rate is over 18% and the Cash on Cash ROI is eleventy gabillion percent. Huge.
Since the units haven’t disappeared from the MLS, I can only assume the adage To good to be true comes to mind. If the units truly were the deal of the century then someone would have snatched them up by now. Are there catastrophic problems with the building? Did it fail a building inspection and requires major overhaul? Divorce?
Good questions to ask and definitely worth checking on. The original MLS listing did not mention anything about the property being sold as-is. When a property is sold as-is, it usually means the property has a major problem and the owner doesn’t want to pay for it. They want to dump the property onto someone else for a reduced price.
As far as the on paper aspect, the property appears solid.
You say to your friend, “Friend, let’s go out tonight.” “I can’t,” Friend says. “My property tax bill came (website). I have to save all my money.” For the next month, Friend eats only ramen noodles. Before long, Friend starts looking a little ripe from […]
Final arrangements. All your life, there are choices. You live your life believing we are always in control of the things we choose. Or are we? Recently, I have been the unfortunate participant in planning a funeral. My parents have long since been deceased, since […]
How do you prepare for a home inspection?
Proper planning for a home inspection by the buyer and seller make home inspections go much more smoothly.
As a seller, it is best to prepare as much as possible by making sure your home is clean and presentable.
- Allow two to three hours for a complete home inspection. Sometimes even longer depending on the size of your home, number of rooms and age of your house.
- The buyer should accompany the inspector for best education. As the inspector finds problems, the inspector is able to explain to you in more detail by speaking with you then and there and pointing out the problem rather than trying to write a detailed report.
- The property owner should be contacted regarding the time, date, and estimated duration of the home inspection.
- The home inspector should have the buyer’s full name, address, and phone number, if the buyer is unable to attend the inspection. It’s best practice if you can not be present, send someone to be there anyway. They can explain to you better what situations have come up.
- The home inspector should be contacted at least 24 hours before the inspection if the appointment needs to be canceled or postponed.
- The property’s systems (i.e., gas, electric, water, and oil) should be turned on for the inspection. It’s pretty difficult to test electric current or water pressure when there is no service.
- The owner should be informed that all appliances, equipment, and systems will be inspected and returned to the condition in which they were found prior to the inspection. The inspector should NEVER need to permanently damage any appliance or any part of the existing structure of the home to make an inspection.
- Access and keys must be made available for all property, including garages, closets, attics, etc..
- The owner should move items that block access to the furnace, the boiler, a hot-water heater, the attic, crawl spaces, access panels, electric service panels, water meter, etc…
- All sinks, tubs, and basins should be emptied.
- The written inspection report is provided to the buyer after the inspection. The buyer should indicate if the report should be shared with the real estate agents, realtors in Houston Heights or other parties. Often it is best to submit the findings when you are ready to make an offer, as a reason as to why you have reached the final value of the house that you have.
- Payment is due upon completion of the inspection.