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.
@JJ Buckner congrats on your 1st deal...But my question is Why aren't you setting aside money for Vacancy, Repairs, Cap EX?
@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.
@JJ Buckner congrats!! Sounds like an awesome first step into your real estate career
Thank you @Kristin Caras !!
How many beds and baths does your property have if you don’t mind me asking?
@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.
@JJ Buckner congratulations on your first deal. You're definitely right about Kansas City being a competitive market. Looks like a good deal.
Congrats on your first property @JJ Buckner!
I'm in KC here. Just wondering, which neighborhood did you purchase your property in?
@JJ Buckner congratulations!
@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!
@Ryan Huynh I purchased it in the Independence area.
@Don Mangiarelli appreciate the feedback. The half bath will be put in at a later date. It is not part of this rehab.
Congrats man! Just the beginning!
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!
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.
@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!
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.