May 03

How to Underwrite a Single Family Home

Single family home underwriting
29th and Plum
Found while driving for dollars and noticed a For Sale sign buried in the bushes. 300+ days on market. Asking price was $64,900, down from $80k original listing price. I offered $42,500. They countered at $59k. I countered at $44,500. They countered at $54k. I said contingent upon walk through… walked through and stuck to my $44,500 which they accepted.
$44,500 purchase; ARV $80k. I used lines of credit for the full purchase + renovations. Once rented, I refinanced into a long term loan with a private lender and paid off all related debts.
Invested $12k; new bathroom, 4 new windows, extensive plaster repair, new high end stove and wall mounted microwave, new exterior door, electrical upgrades and repairs, new light fixtures, new locks and bulbs, new hot water tank, painted throughout.
Gross Rent $1100
$159 taxes
$25 Insurance
$80 Maintenance (8%)
$80 Vacancy (8%)
$80 CapEx (8% Capital Expense)
$4 City of Erie Rental program
$572 Net operating Income
$492 debt
= $180 cashflow
In the last 3 years since ownership, I’ve had to replace 2 exterior flood bulbs, rebuild a small exterior stair system, and install a new A/C Condenser unit in the spring after move in since we couldn’t test mid winter.
As a bonus, I’ve had the privilege of moving a favorite tenant family from one of my 2 bedroom apartments into this beautiful home that they are forever grateful for.
Rinse and Repeat.

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