Case Study - 500 Felitz Contado

In this case study, I will cover how a property goes through our process, from initial discovery through leasing. At the end of the article, I will show the return based on actual costs and rent.

The Property

The property is a single family home located at 500 Feliz Contado Ct in the south-east part of the city and is marked on the map below:


The property was initially selected using our software based on an estimated rent of $1270/Mo. Here is the initial video I took of the property. The sales comps are poor, not a good representation of the subject property. I believe that $220,000 is about right based on my looking at similar properties.

Comps

Similar Properties Recently Sold

MLS Dist SqFt Sale Price PPSqFt Garage Lot Beds Stories
1847695 0.77 1966 249900 127 2 5227 4 2
1824231 0.72 1899 249000 131 2 6534 3 1

Estimated value based on the above comps: $129/SqFt x 1799SqFt = $232000

Similar Properties Recently Rented

MLS Dist SqFt Sale Price PPSqFt Garage Lot Beds Stories
1847315 0.39 1600 1250 0.78 2 3049 4 2
1830031 0.32 1934 1295 0.67 2 4356 4 2

Estimated value based on the above comps: $0.73/SqFt x 1799SqFt = $1310 The renal comps look reasonable, if not a bit low. Will get Jenni's opinion.

Return Based On: (Sale Price: 220000/Est. Rent: 1310/Interest Rate: 5.0%)

We sent the video to Jenni Mckenna (the property manager) for her opinion.

"MLS #1880756 500 Feliz Contado Court. I like it. Location is outstanding. LOVE, love the park just across the street. Single story, open floorplan. Kitchen is dated. Cabinets look a bit worn and ceramic tile should be changed to granite to update kitchen. Like the ceramic tile flooring. High ceilings are nice and I like the remodeled master bath. Didn't see a backyard shot? Is it a mess? I would also look into why there is an A/C unit attached to the side of the home. Is it for the garage or does the home need additional A/C? Rent for this property would be $1350-$1375 and would be rented within a few weeks no problem."

We made an offer of $215,000 with no seller contributions and no repairs. The seller needed the ability to stay in the home for a few days after close and we agreed to this in the offer. Here is the MLS sheet showing closed. The offer was accepted so we had the home inspected. Here is the inspection report. I sent my notes along with the inspection report to the client. Below are my notes concerning the inspection report. Note that the numbers correspond to the numbers in the inspection report.

2.1 Doors 2.3 Garage Door Opener 2.8 Patio Coverings 4.1 Anti-Siphon Valve 4.4 Interior Water Supply 4.5 Kitchen Components 4.6 Hall Bathroom 5.5 Connected Devices 5.7 GFCI 6.1 Ceilings 6.2 Floors 6.4 Doors 6.6 Counters and Cabinets 6.7 Bathrooms 8.8 Gas Fireplace 10.2 Venting System

Below is my cost estimate:

Item Qty Unit Cost Ext
Appliance - Dishwasher 1 400 400
Appliance - Dryer 1 450 450
Appliance - Exhaust Fan 1 65 65
Appliance - Garage Door Opener 1 350 350
Appliance - Refrigerator 1 800 800
Appliance - Washer 1 450 450
Door - Glass Sliding Door Lock 1 50 50
Floor Clean Grout 1 200 200
Floor - Tile 100 5 500
Floor Laminate 120 5 600
Light - Fan - Ceiling 1 150 150
Misc Bathroom Mirror 1 50 50
Paint - Interior 900 1 900
Remove Hot Tub 1 500 500
Paver Patio 1 700 700
Kitchen Countertop Granite 1 1500 1500
Plumbing Repair Tub Surface 1 265 265
Plumbing - Bathroom Sink Faucet 1 65 65
Total 7730

Whenever I am not certain what is the best way to rehab property for maximum return I ask the property manager and the handyman to go through the house with me. We did this on May 1st. Here is the video. Based on the property manager's recommendations and an estimate of probable rent after upgrading the property, the client decided to make additional improvements. Here is the quote from the handyman for the revised work. Note that the total ($9,430) does not include the refrigerator (~$800) or the small vanity (~$150). I believe the actual total rehab cost to be approximately $12,000. Based on the final condition of the property, the property was placed on the market for $1,550/Mo. on 5/20/2017 and leased on 6/1/2017 (12 days). Here is the MLS listing. Below are calculations based on actual numbers.

500 Felitz Contado Actuals

Purchase Price 215000
Management 8%
Annual Insurance 425
Annual Real Estate Tax 1261
Annual Period Fee 0
Closing Cost 6006
Financing - Down 20%
Financing - Rate 5.25%
Financing - Term (Years) 30
Monthly rent 1550
Income:
Annual Rent 18600
Reoccurring Expenses:
Annual Debt Service -11397
Annual Management Fee -1488
Annual Insurance -425
Annual Real Estate Tax -1261
Annual Period Fee 0
State Income tax 0
Total Reoccurring Expenses -14571
Acquisition Cost:
Down Payment -43000
Closing Costs -6006
Rehab Cost -12000
Total Acquisition Cost -61006
Pre Tax Cash Flow (Ann) 4029
Pre-tax Cash Flow (Mo.) 336
Pre Tax ROI 6.60%

Summary

In this case study, I covered how a property goes through our process, from initial discovery through leasing. In the end, I included actual return.