Podcast Real Estate

Analyzing a Deal with Our Rental Property: Episode 4

August 8, 2019

On episode 4 of From the Nest Podcast, Chris and I are analyzing a deal with our first rental property. We discuss the different ways to analyze a deal and why we felt this would be a valuable income property for our investment portfolio.

Woody, our first investment property

INCOME PROPERTY STATS

  • Asking price: $99,900
  • Purchase Price: $87,000
  • Bedrooms: 3
  • Bathrooms: 1.5
  • Square Footage: 1,290
  • School District: good

ANALYZING THE DEAL

CAP RATE = NET OPERATING INCOME / PROPERTY VALUE
  • Net Operating Income (NOI) = annual gross income – annual expenses
  • Annual expenses: Property Expenses, maintenance, taxes, insurance
EXAMPLE: WOODY
  • Property Value (what we bought the property for): $87,000
  • Annual Gross Income (annual rent): $14,400 ($1,200/month)
  • Annual Expenses: $3,700
    • Taxes: $1,300
    • Insurance: $1,200
    • Maintenance: $1,200
  • NOI: $14,400 – $3,700 = $10,700
  • CAP RATE: $10,700/$87,000 = 12%

Property Improvements

We spent about $10K on renovations for this property which included new appliances, a brand new kitchen and a fresh paint job. To see the full story behind this home and all of the before photos, check out this post.

Kitchen Before

Kitchen before renovations

Kitchen After

Investment property kitchen after improvements
New appliances, granite countertops and DIY bead board backsplash

Dining Room After

Built in buffet for extra storage with a stained piece of pine as the countertop to lower the cost ($20)

DIY built-in buffet
Freshly painted dining room

Master Bedroom Before

Master bedroom before paint

Master Bedroom After

Master bedroom after paint

Upstairs Bedroom

Large upstairs bedroom with bonus room

We painted the built-ins white and added new knobs to complete the look of this bedroom.

Built-in drawers we painted white and added new knobs.

Bonus room off of the bedroom upstairs.

Back room in the upstairs bedroom

What we would change with our renovation

The one thing we would change if we could do this renovation over again – the flooring! In theory, this floor seems like it would work great, but because it is an old house and the floors are not completely level, the floor tiles do not snap together perfectly and are not completely flush in all areas of the kitchen.

Capitola Silver Life Proof floor tiles – we would not recommend using this in an old home with floors that are not level.


You Might Also Like

No Comments

Leave a Reply