Episode #4: Analyzing Our Income Property

LISTEN TO THE FULL EPISODE

Thanks so much for tuning into episode 4 of the From The Nest Podcast!

SHOWNOTES:

INCOME PROPERTY STATS:

  • Asking price: $99,900

  • Purchase Price: $87,000

  • Bedrooms: 3

  • Bathrooms: 1.5

  • Square Footage: 1,290

  • School District: good

Woody, our income property


RENOVATIONS

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.

BEFORE:

Kitchen before renovation with stove in the middle of the walkway

AFTER:

The entire kitchen was purchased through The Home Depot.

The kitchen after the renovation

New appliances, granite countertops and DIY bead board backsplash

dining room:

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

New paint throughout the entire house

BEFORE:

Master bedroom before paint

AFTER:

Master bedroom after paint

UPSTAIRS BEDROOM:

Large upstairs bedroom with bonus room

We painted the built-ins white and added new knobs

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

Back room in the upstairs bedroom


THE ONE THING WE WOULD CHANGE

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.

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


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

    • Annual Taxes: $1,300

    • Annual Insurance: $1,200

    • Annual Maintenance: $1,200

  • NOI: $14,400 - $3,700 = $10,700

  • CAP RATE: $10,700/$87,000 = 12%


CHRIS AND LINDSEY’S TIP OF THE WEEK

Tip from Chris: If you have a crawl space, make sure your pipes are insulated to avoid your pipes from bursting in cold weather

Tip from Lindsey: Paint stores offer color matching. You can bring in a chip of a current paint color or ask someone at the store for the booklet of swatches from a more expensive paint store and have them color match paint with a less expensive brand. I have done this with Sherwin Williams colors using Behr paint.