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Investment Analysis: 11204 Chestnut Grove

On Thursday this week, my Meet Up Group and I toured a couple bank owned properties. 11204 Chestnut Grove is a 1bd 1bth condo located in Reston, VA. It was originally listed at $208,000 but has been reduced to $168,000. The following is a quick investment analysis that I use to determine whether or not to an investment would be a good fit in my investment portfolio. Hopefully this can help you in your investment property search!

11204 Chestnut Grove Investment Analysis

Property History:

  • 04/19/2002: Sold for $85,000

  • 06/30/2006: Sold for $220,000

  • 11/17/2015: Listed for $219,000

  • 11/19/2015: Listing withdrawn

  • 02/05/2016: Listed for $208,000 and later reduced to $168,000

List Price: $168,000

Offer Price: $150,000

Condo Fee: $423.83/month

HOA Reston Annual Fee: estimate = $600/year, or $50/month

Estimated Insurance Cost: $300/year: $25/month

Taxes: $1,800 (1.2%): $150/month

Estimated Principal and Interest: assuming 20% down 30 year fixed at 4% interest: $573/month

Cost to renovate: $5,000 ($416/month)

1st Year Financials:

Estimated Monthly Revenue: $1,350

Estimated Monthly Expenses: $1,637.83

Monthly Cash flow (profit): -$288

2nd Year Financials:

Estimated Monthly Revenue: $1,350

Estimated Monthly Expenses: $1,222

Monthly Cash flow: $128

Annual Profit: $1,536

Return on Equity:

Net Operating Income (NOI)/Equity

$1,536/(20% of 150,000 or 30,000) = 5.12%

Estimated Cap Rate:

Annual Revenue-Expenses (not including mortgage)/Acquisition price

Annual Revenue: $1,350*12= $16,200

Annual Expenses not including mortgage: $7,785.96

Profit/NOI: $8,414.04

Acquisition Price: $150,000

Cap Rate: $8,414.04/150,000 = 5.6%

Cap rate takes out the mortgage piece and assumes the property is paid for without financing.

My advice: I like how the property is within walking distance to the metro, however the condo fees kill the return on this investment. $423.83/month for a 1bd1bth is very high. There are other areas in Reston with lower condo fees. For instance, I pay $360/month for a 2bd2bth in Parc Reston. Purchasing a 2bd2bth over a 1bd1bth presents an opportunity to increase cash flow on a monthly basis. Basically match 2 roommates together and write two separate leases. I do this with an investment property I own in Parc Reston and it has increased my revenue by 30% over what I would have received by renting to only one family. In addition, it may be difficult to obtain investment financing depending on the proportion of renter occupied to owner occupied units in the complex. If interested, I’ll dig deeper and look into the condo docs for rental restrictions and to find this proportion of renters to owners. All in all, there are better investment opportunities in Reston. I would pass on this one and continue to look for other opportunities that have cap rates in the 8-10% range.

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