First deal done!

17 Replies

Just finished my first deal all the way through to lease!! Purchased a turn key a few weeks back and leased yesterday to awesome tenants for $400/mo net cash flow (SFH). Feels great to have gone through the process. Now on to house #2.

(Side story - the one and same city inspector who just signed off on the house a few weeks back gave me a long list to take care of in coming 45 days.   Is there any objectivity or fixed reference point in the inspection business???).     

Nice work @Jon Quigley . What is your monthly rent on the house? Expense breakdown?

Thanks @Rob Beland.  This area is a C neighborhood with cap rates around 1.5%.

Purchase:  $62000

Note:  $262/mo

Ins:  $60/mo

Taxes: $170/mo

Repair savings fund:  $100/mo (see note)

Rent:  $985/mo

The seller had remodeled everything, so in the coming 5 years I don't see repairs/capx being any more than $100, though it'll increase after that as the new appliances age.

I mean $100/mo  (any way to edit one's own post like in FB??)

Originally posted by @Jon Quigley :

Thanks @Rob Beland.  This area is a C neighborhood with cap rates around 1.5%.

PLEASE PLEASE show the calculations that resulted in a 1.5% cap rate!!!!!!!!!!!!!!!

Originally posted by @Jon Quigley :

Thanks @Rob Beland.  This area is a C neighborhood with cap rates around 1.5%.

Jon, while you're doing your editing, you should edit the line above. I presume you meant 1.5% rent ratio not cap rate. Anyways, congratulations on your first deal!

Mike D'Arrigo, Pinnacle Investment Properties, LLC | [email protected] | 800 348‑0956 | http://www.investwithpinnacle.com

Thanks all for the congrats.  (I can't see how to edit an existing post).    

Mike is right it was 1.5% rent ratio (985/62000*100).  

The cap rate is 7.7% (12*400/62000*100).  Still learning the terminology...  

My favorite number is the ROI. I am all in for $16,700 with annual net of 12*400 = $4800. This gives an ROI 4800/16700*100 of 29% before counting equity buildup; tax breaks and potential appreciation. Good luck getting that in the stock market :-).

Originally posted by @Jon Quigley :

  The cap rate is 7.7% (12*400/62000*100).  Still learning the terminology...  

What operating expenses are you subtracting from your income to get NOI aand what is your NOI?

For my case NOI = rent - principal/interest - taxes - insurance - repairs.

985-262-60-170-100 = ~400/mo.   

Inspection costs are good for 3 years so no more cost there. Repairs are small because everything is new and little repair will be needed for probably 4 or 5 years. Tenants want to stay for three years so vacancy is near zero up through end of year 3. As repairs begin in year 4 or 5 my NOI will go down as I escrow for those repairs. I could always sell at the 5 year mark and skip the repairs all together.

@Jon Quigley

Hi Jon, congratulations on the first deal, and looks like it works based on the numbers. 

From my experience you have a 33% expense ratio which does look a little underestimate for a C neighborhood, I would use 40% - 45% even if it seems to be in good condition. 

But I hope you can have minimum along the way:)

Congratulations.  It looks like you are managing it your self.  You might get at least an idea on how much life the roof has left in it, and how old your water heater is, HVAc, heating system, etc and figure out a number to set aside for replacing those someday.  If you got a 30 year note you might consider throwing an extra hundred or 2 towards your mortgage over your payment amount, it will make a huge difference early in the game.  You will have extra expenses on things like taxes and other items you did not expect but as you add properties those costs will drop per property as they tend to be static.

@Jon Quigley

 - Congrats!  the first one always seems to be the hardest.  Stabilize and start to look for the next one.

Originally posted by @Jon Quigley :

For my case NOI = rent - principal/interest - taxes - insurance - repairs.

985-262-60-170-100 = ~400/mo.   

Inspection costs are good for 3 years so no more cost there. Repairs are small because everything is new and little repair will be needed for probably 4 or 5 years. Tenants want to stay for three years so vacancy is near zero up through end of year 3. As repairs begin in year 4 or 5 my NOI will go down as I escrow for those repairs. I could always sell at the 5 year mark and skip the repairs all together.

Principal & interest are not operating expenses. See how your NOI would then be overstated?

Originally posted by @Jon Quigley :

For my case NOI = rent - principal/interest - taxes - insurance - repairs.

985-262-60-170-100 = ~400/mo.   

Inspection costs are good for 3 years so no more cost there. Repairs are small because everything is new and little repair will be needed for probably 4 or 5 years. Tenants want to stay for three years so vacancy is near zero up through end of year 3. As repairs begin in year 4 or 5 my NOI will go down as I escrow for those repairs. I could always sell at the 5 year mark and skip the repairs all together.

Principal & interest are not operating expenses. See how your NOI would then be overstated?

Hello does anyone know about the fid it and fund it program? Is this anygood?

Hi Jon,

That sounds like a great deal! Congratulations!

Melissa

congratulations alwAys exciting when your done (house closed/tenant in play). Just be careful because I was bitt a hard lol! I keep telling myself I will take a break this summer once we have gotten to 7 and than I dream about having 8 by Christmas lol

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