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 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.
- Asking Price: 219000
- PPSqFt: 122.0
- Days on Market: 3
- Original Price: 219000
- Monthly Fees: 0
- SqFt: 1799
- Lot: 6098
- Beds: 4
- Baths: 2
- Stories: 1
- Garage: 2
- Built: 1996
- Pool: No
- Subdivision: Race Track Homes
Similar Properties Recently Sold
Estimated value based on the above comps: $129/SqFt x 1799SqFt = $232000
Similar Properties Recently Rented
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%)
- Sale Price: 220000
- Est. Rent: 1310
- Monthly Fees: 0
- Debt Service (Mo): 945
- Interest Rate: 5.0%
- Down Payment: 20%
- Loan Term (Yr): 30
- Insurance (Mo): 38
- Management: 8%
- Current Taxes/Mo: 105
- ROI Financed: 2.8%
- Cash Flow (Financed): 118
- ROI Cash: 5.7%
- Cash Flow (Cash): 1063
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 * Install door handle * Close opening in garage wall
2.3 Garage Door Opener
- Intermittent operation. We should check to see if it can be repaired. If replaced, $350.
2.8 Patio Coverings
- The cover was not professionally installed. We have some options: 1) Remove the cover - I prefer to keep the cover. 2) Correct the footings and install a patio. The ends of the posts should sit in tin end caps that sit on top of the patio deck. We would also paint the ends of the posts to seal them. Any paint will do. I included the cost for this in the patio paver estimate.
- We typically use pavers on the patio. Pavers do well in this climate because there is little rain and the "soil" is primarily sand+small rocks. The installation process is to dig down a few inches, lay a 2" bed of gravel covered by compacted sand. The alternative would be to pour concrete. I have no experience with concrete so I will need to get a quote.
4.1 Anti-Siphon Valve
- Code requires an anti-siphon valve.
4.4 Interior Water Supply
- Check when and why repair made. I suspect they replaced the water heater. Not an issue, just curious.
4.5 Kitchen Components
- I suspect the homeowner replaced the garbage disposal. Covered in Misc cost.
- No cold water to sink probably result of silted valve. Worst case is we replace the faucet.
- Low flow from RO. Remove RO.
4.6 Hall Bathroom
- Bat tub to be coated. Verbal quote throfromugh McKenna for $265.
- Replace faucet.
- Shower valve installed upside down. Included in Misc.
- Slow draining sink. Likely hair and soap in the sink stopper.
5.5 Connected Devices
- Cap attic wire. Included in Misc.
- My guess is that they have ground and neutral reversed. Rewire. Included in Misc.
- Mark on ceiling appears to be cosmetic, which will be handled when ceiling is painted.
- I need to explore options to correct the lose tiles in the kitchen area. Solutions could include replacement tile or laminate. I included 100SqFt of tile as a guess.
- If you wish to use laminate in the front living area I will need to get a cost estimate. The baseboards are the question. We may or may not have to replace them depending on how they were installed. I will use $4.25/SqFt in the estimate. 10x12 = 120SqFt
- Repair door jam on door connected house to garage.
- Adjust master bathroom closet door.
6.6 Counters and Cabinets
- We've dealt with these white tile counters many times. The easy approach is to replace individual tiles as needed. These should be readily available. The alternative would be to replace counter with granite (I included $1,500 in the estimate). I am not certain this would increase the rent sufficiently to justify this expense. Need Jenni's input.
- Fix/adjust cabinet doors.
- Reattach bath tiles. Included in Misc.
- Replace cracked mirror.
8.8 Gas Fireplace
- Replace door handles. Included in Misc.
10.2 Venting System
- Replace bathroom exhaust fan.
Below is my cost estimate:
|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|
|Light - Fan - Ceiling||1||150||150|
|Misc Bathroom Mirror||1||50||50|
|Paint - Interior||900||1||900|
|Remove Hot Tub||1||500||500|
|Kitchen Countertop Granite||1||1500||1500|
|Plumbing Repair Tub Surface||1||265||265|
|Plumbing - Bathroom Sink Faucet||1||65||65|
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
|Annual Real Estate Tax||1261|
|Annual Period Fee||0|
|Financing - Down||20%|
|Financing - Rate||5.25%|
|Financing - Term (Years)||30|
|Annual Debt Service||-11397|
|Annual Management Fee||-1488|
|Annual Real Estate Tax||-1261|
|Annual Period Fee||0|
|State Income tax||0|
|Total Reoccurring Expenses||-14571|
|Total Acquisition Cost||-61006|
|Pre Tax Cash Flow (Ann)||4029|
|Pre-tax Cash Flow (Mo.)||336|
|Pre Tax ROI||6.60%|
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.