Real Estate Brokerage & Property Management Blog

Here you will find the latest real estate endeavor stuff I engage in on a daily basis.

Tuesday, October 20, 2009

Investment Analysis- "Victorian Mini Mansion"

Hi Prospects & Friends,

I noticed this mini mansion last weekend on the market and I will drive by it this weekend, because it's a beautiful home and also because it has nice home stats. It caught my eye due to the seller just reduced the listing price $50,000 and is including the furniture in the package. This is a subdivision I've studied over the years and many homes don't come available often. I did my analysis on this home so see the stats below:

Original Listing Price $349,900
Seller Reduced Just Last Week: $50,000
New Listing Price: $299,900
Year Built- 1982
Gross Sq.ft.- 4,294
Bedrooms- 5
Bathrooms- 3.5
Garage- 3 car attached
Lot- 12,100 sq.ft.
Yearly Taxes With Homestead Exemption- $6,252
Yearly Maintenance- $500
Proposed Insurance- $250/mth
Rent/last 6mths- $0.54
Price/sq.ft./last 6 mths- $81.15
5 Year S.M.A. Low- Occurred 11/30/04 @ $58.92/sq.ft.
5 Year S.M.A. Peak- Occurred 4/17/06 @ $87/sq.ft.

Market in last 6 months says this home is worth $348,458, seller has new listing price @ $299,900 including the furniture. So it is an enticing deal, but as a broker/realtor I have to put my hat on as a buyer/investor first. So for me this home needs to come down to my range of $$268,886-$284,643 for me to touch it, because of the recession and market trends I've studied for this subdivision. So I will use rates of 4.8% and 5.35% since the market is saying that's what rates are going for right now at this point. See equations explaining:

(4,294 sq.ft x $0.54=$2,318.76-$521-$42-$250=$1,505.76/5.29x1000=$284,643)
(4,294 sq.ft. x $0.54=$2,318.76-$521-$42-$250=$1,505.76/5.60x1000=$268,886)

So since my range is $268,886-$284,643 and seller originally had it listed for $349,900 and now it's listed at $299,900, and the low was $58.92 and high was $87 in past 5 years. I can conclude right now the price is perfect, but because I like to build instant equity, home needs to fall in my range to make numbers work for me. So seller isn't too far from my $284,643 since it's now listed @ $299,900 and if they continue to reduce the price who knows it may get as low as my other part of my range which is $268,886. The 5 year S.M.A. comes out to for this home see equation below:

4,294 sq.ft. x $58.92=253,003
4,294 sq.ft x $87=$373,578

So I can analyze from the 5 year S.M.A. this home will hit back around $373,578+ when the recession is over and max of 5 year trend from that moment, and I can also conclude this home could possibly wonder down to $253,003 if the recession still lingers, but in this case trying to see a $58.92/sq.ft in this subdivision won't be possible since the price/sq.ft. last 6 months is $81.15. So the only way to win in this case is to watch for sellers like this one and realize they are listing it at $69.84/sq.ft but it's really selling for $81.15/sq.ft as per the price/sq.ft. in last 6 months. Remember this home isn't a foreclosure, so these are rare deals when you find seller doing this. This home is already fixed up and remodeled, so buying this home from the seller right now at their price would be $81.15x4,294/sq.ft. =$348,458-$299,900=$48,558.10 of instant equity which isn't including your down payment if you homestead this home for 2+ years and didn't sell until the price/sq.ft. reverts above $81.15/sq.ft.

If you use my range of $268,886-$284,643 & wait for the subdivision to peak back @$87+/sq.ft. it will calculate to 4,294/sq.ft x $87=$373,578 & instant equity ranging from $88,935-104,692. You would need to at least stay in the home and not flip, to gain this subdivision investment rewards, since it goes through troughs and ridges. I would stay @ least 5 years then roll equity over into another one like this till I landed $500,000 in equity and proceed with next project or till I'm satisfied with what I want. Some of you are thinking how can she get $500,000 in equity? Well lets just take a refresher course, my range is $268,886-$284,643, and seller has already marked property down from $349,900 to $299,900. The $299,900 isn't too far from my range of $268,886-$284,643 which equates to $88,935-$104,692 in equity. So once I see the seller lower close to $284,643 I know I already I got $88,935 in instant equity sitting pretty for me when I sell when the peak reaches back to $87+/sq.ft. Remember right now the price/sq.ft is $81.15 in last 6 months, not $69.84/sq.ft. which is what the seller is wanting right now. So understanding all of my analysis stats in advance will further you alot quicker. So yes finding 5 sellers like this one will land you $444,675 in instant equity ($88,935x5=$444,675, and that is just the high end part of my range for this house. Low end will equate to $373,578-$268,886=$104,692 in instant equity which is $104,692x 5 sellers=$523,460, and also remember I haven't factored in down payments. So if the house alone is giving you between $88,935-$104,692 imagine just adding a measely down payment of 3%+ to all that instant equity you already got? So lets use reverse psychology, my range of $268,886-$284,643 with a down payment of 3% which equates to a down payment range of $8,067 -$8,539, says: my analysis stat range of $268,886-$284,643 will only cost you as little as a down payment range of $8,067-$8,539 to gain a range of instant equity of $88,935-$104,692, which then equates to instant equity range of $97,002-$113,231 (down payment + the instant equity)

So for this to work you have to have the subdivision investment analysis already factored, and then the sellers are the "Jewels" when they do stuff like this in these kinds of subdivisions.

P.S. If you add this article with my "Investment Analysis- Fourplex" you could actually be quite wealthy, because the seller over at that article is doing the samething, but difference is this is a home you would homestead to live in, and the fourplex would be an investment property you rent out to generate monthly income.



  1. A really great blog. You are one beautiful lady. And you look like you have a lot of personality too. All the best.

  2. Good information for the buyers as far as Austin Real Estate is concerned.