Under Contract On My First Rental Property!

Under Contract On My First Rental Property!

Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes

First, I want to give a HUGE thank you to those of you that have inspired me and a HUGE thank you to Biggerpockets for being one of the main reasons I feel comfortable to make this large jump into becoming a Real Estate Investor. I am currently under contract for my first property and will be closing in September. This has been a long process for me but it has finally happened. I have been primarily looking in the Kansas City market and found out real fast just how hard it is to find a deal right now. Everyone and their brother's nephew's dog is buying real estate in the KC area right now. I have been outbid on idk how many properties but did not let that get me down (although it was tough at some times). 

Just wanted to jump on here real fast and give a quick thank you to Biggerpockets and the REI community for all that they do.

Here is a snap shot of the numbers for the deal. Note: I already have money sitting in an account for any repairs, vacancy, etc.

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Rental Property Investor · HI · Member since 2019 · 38 posts · 93 votes
7y

@JJ Buckner Congratulations. Only thing I would say is that you should still put in the numbers for CapEx and Vacancy and Maintenance, even though you have that money in an account. It is still going into the property and you need to show it in the numbers. You say you are adding a half bath, that is a cost and it should reflect against your numbers for accuracy. Looks like a great deal!

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  • Rental Property Investor · Norwalk, CT · Member since 2017 · 171 posts · 138 votes
    7y


    @JJ Buckner congrats on your 1st deal...But my question is Why aren't you setting aside money for Vacancy, Repairs, Cap EX? 

  • Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes
    7y

    @Melba Chambers Thank you and great question! 

    1. As mentioned above, I already have money sitting in an account that will cover any expense or vacancy for this property.

    2. The cash flow from this property will all be going directly back into the business (to buy more properties and pay down mortgage) so no need to pull out the additional money.

  • None · Member since 2018 · 125 posts · 46 votes
    7y

    @JJ Buckner congrats!! Sounds like an awesome first step into your real estate career

  • Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes
    7y

    Thank you @Account Closed!!

  • Flipper/Rehabber · Atlanta, GA · Member since 2014 · 166 posts · 88 votes
    7y

    @JJ Buckner

    How many beds and baths does your property have if you don’t mind me asking?

  • Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes
    7y

    @Ricardo S. Yea for sure. It is a 3 bed 1 bath and I will be adding a half bath in a year or so from now.

  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    7y

    @JJ Buckner congratulations on your first deal. You're  definitely right about Kansas City being a competitive market. Looks like a good deal.

  • Rental Property Investor · Kansas City, MO · Member since 2018 · 32 posts · 19 votes
    7y

    Congrats on your first property @JJ Buckner!

    I'm in KC here. Just wondering, which neighborhood did you purchase your property in?

  • Charlotte, NC · Member since 2018 · 40 posts · 7 votes
    7y

    @JJ Buckner congratulations!

  • Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes
    7y
  • Rental Property Investor · HI · Member since 2019 · 38 posts · 93 votes
    7y

    @JJ Buckner Congratulations. Only thing I would say is that you should still put in the numbers for CapEx and Vacancy and Maintenance, even though you have that money in an account. It is still going into the property and you need to show it in the numbers. You say you are adding a half bath, that is a cost and it should reflect against your numbers for accuracy. Looks like a great deal!

  • Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes
    7y

    @Ryan Huynh I purchased it in the Independence area. 

  • Investor · Jacksonville, FL · Member since 2014 · 48 posts · 24 votes
    7y

    @Don Mangiarelli appreciate the feedback. The half bath will be put in at a later date. It is not part of this rehab. 

  • Rental Property Investor · Corpus Christi, TX · Member since 2019 · 306 posts · 176 votes
    7y

    @JJ Buckner

    Congrats man! Just the beginning!

  • Rental Property Investor · Fresno, CA · Member since 2018 · 40 posts · 31 votes
    7y

    Congratulations!! I am in escrow for my first investment property as well in the Grandview area, so not too far from you. Definitely an awesome moment, enjoy it! 

  • Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes
    7y

    @JJ Buckner

    We bought one in Independence last October! I remember there were like four or five bids on it. It was a 3br2ba with an amazing kitchen.

  • Real Estate Coach · Charlotte, NC · Member since 2016 · 399 posts · 341 votes
    7y

    @JJ Buckner congrats on the first deal! I would echo others though in stating that you still need to account for reserves regardless of what you have in an account now. What happens when you use up the funds in that account? Can your current rental income replenish it and still generate cash flow?

    I would also encourage you to think about your property management costs. Is it all in at 8% monthly and no charge for placement, lease renewal, etc.? Or is it like most companies where they charge 50-100% of first months rent? Full month adds 8.3% to your monthly Mgmt calculation.

    Best of luck!

  • New to Real Estate · Rome, GA · Member since 2017 · 107 posts · 34 votes
    7y

    Disclaimer: I am a newbie, I don't even have an investment property yet. (Feel free to blast me) 

    I would throw that money you have saved up for (Vacancy, Maintenance, Cap Ex, and Property Mgmt) into your "Est. Total Cash Down". That money will be tied up in the investment and should be included in your calculations for a realistic COCROI. Excluding that money will either inflate your ROI, CF, or both.

    Also, I personally think the 50% rule is a really conservative estimation for cash flow so it may not represent realistic expectations for cash flow but here are your numbers...

    Your rental income projection is $995, PITI is $484.16

    50% Rule (Cash flow) = (Rental Income x 0.5) - PITI

    50% CF = $13.34/mo 

    *If you do you own maintenance, PM, your property is totally updated, it is tenant proofed, awesome tenants, etc... then 50% Expenses on top of PITI is probably a gross overestimation.

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