I am now up to three properties, but the first really worked out well, here are the details:
I'm in Jacksonville FL and in 2012 the market was still pretty rough from the financial fallout. I met a property manager who worked at the same company I did and met with him basically saying, "You're my guy, I want rental properties."
Not long after that he approached me with one of his owners that had moved out of the city and wanted to cut ties with the area. The property already had tenants, and they were all planning on staying for a while.
Here's where luck kicks in a bit. The price was 125k, and I put over 25% down to get the interest rate to 4%. The rents has always been around 1300+/- so it has made money from day one. I knew nothing about valuation, 1% rules, 50% rules etc, but I knew that I would be making money every month so I dove in.
Over the past few years it has needed some work, it's in a nicer neighborhood and a larger investment company has bought up alot of properties and rented them out, but they really spiffed up the insides quite a bit. So aside from occasional repairs and exterior cleaning demanded by the HOA I have had to put in about 4k. That went to a combination of cosmetic upgrades and durability upgrades to cut down on future repairs/carpet replacement etc.
Last year I bought another house on the same street, and that cost around 168k, so I know the first one has a little appreciation built in.
About your first house for $125,000. Your rent roll was $1,300 in total? Was it a singe family?
Yes it was a single family. In this area in Jacksonville (between 295 and the beaches) it's about average.
So what is the amount of positive cash flow?
We bought 2 sister, matching duplexs with a shared driveway that after we raised the rents on 3 should now cash flow for approx $2,000 a month BUT both duplexes needed a new roof and a cosmetic new sided front and upgrades on the bathrooms (we have done 3 bathrooms) One tenant moved out so their apartment had to be painted, with a new refrigerator and new cabinets in the small kitchen (inexpensive, but good) and the bathroom upgraded. We self manage the 2 duplexes.
The bottom line is we have the 2 houses for one year and so far have put all the positive cash flow into the renovations and we still have approx $10,000 more work. We still need one more roof on the second duplex.
We estimate we need to put another 5 months of positive cash flow into the rest of the renovation and after that we should be running with the $2,000 a month cash flow. Of course the property has appreciated because of the renovations and the neighborhood is Blue collar good.
This is been so far like a second job but we feel OK about it. We would be happy if we could find another two like this. How does this deal sound to everyone?
Barbara, I feel your pain, my second deal sounds alot like your duplex.
The first deal looks like this:
Current rent as of the beginning of March 1295
Current mortgage P&I with taxes and insurance escrowed: $680
Property management 10%, so around $130/mo
repairs 10% of rent/yr 1300
Net to me: $325/mo
Congratulations @Carter Melvin on your success. We have a great market for cash flow here. Looks like you have rentals in a pretty good area. That side of town has some nice A and B class type properties.
Congrats and continued success!
congrats @ Carter Melvin for taking action
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.