Search Criteria

We are still looking for a home.  The search parameters seem pretty rigid, but it seems they have to be. 

We put together a huge excel file so we can look at each of the properties we like on a side by side basis and make sure they meet our criteria.

First thing we do is look at our target area and make sure the home is in a good neighborhood and not near any future construction that could have a negative effect on future property values.  We set up a layer in Google Maps to pinpoint the good and not so good areas.

Then we look at the high school for the area and make sure that the school ratings meet or exceed standards.  We do this because the clients in good school areas will usually mean more value oriented tenants.  If the kids are doing well, the families are usually doing well.

We also categorize the time it will take to do the rehab work.  None of these categories are a deal breaker, but it gives us good data to help make our decision.  The time element categories are:

-        Red: Major Construction.  Need an RV to stay in during the process.

-        Orange: Regular Construction we can do with sub-contractors.

-         Yellow: Smaller projects.  Maybe sub-contractors.

-        Green: Minimal carpet and paint.

-        White: No work, only clean and rent.

Then there is the math.  We use excel and enter in the following values.:

-        Sales price,

-        Down payment,

-        What the value of the house actually is,

-        Tax rate for the home,

-        How much we think we can rent it for,

-        Home owner association fees,

-        Any cost for monthly pool service if applicable,

-        Estimate cost for the rehab work,

-        Cost per month for the property management,

-        Cost of home insurance,

-        Cost of flood insurance if applicable,

-        Bank fees,

-        Mortgage fees,

-        Leasing agent fees, and

-        Inspection fees. 

From here, we have the computer come up with the following:

-        Initial Equity

-        Income Tax Rate

-        Ernest Money (usually 3%)

-        Loan Balance

-        Down Payment (usually 25%)

-        Est. Closing costs

-        Taxes

-        Out of Pocket Expenses.

Then we have the computer calculate the Ongoing Costs on a monthly and yearly basis.  These costs are:

-        Mortgage

-        Taxes

-        Insurance

-        Property Management

-        Pool Service

-        Home Owners Association

-        Income Taxes

-        Maintenance Fund

When the computer does the math it shows us all the homes side-by-side and give us a big picture estimate of what our initial out-of-pocket expenses will be, how much time it will take to fix the home up, and how much (if any) profit there will be after all of the expenses.  Here is a photo of what that looks like.

Screen Shot

In the mean time, still looking.