just closed on #18 rental today. it's located in westland, michigan.
this one was very weird and almost didn't happen at all. it had 5-6 stumbling blocks, but my experience helped. not giving up and trying something new also helped.
it came up on the MSL about a month ago. it said "great investment oppt, tenant wants to stay and rent for $700 per month".
i tried to get in touch with the listing agent (turns out broker). he texted, but did not answer. next day he told his agent to work with me. made an appt to see it, then agent called back 3 mins later and says "tenant is sick, house is off the market". so i gave up, but kept thinking about it.
2 days later i was browsing the Broker's site and noticed that one of his agents is the wife of a coworker. so i immediately got in touch with her and we were able to see the house the next day.
turns out it's a 4 bedroom (legal basement room) in a 3 bedrooms area of westland. rents in that are can go up to 1,050. this house was super nice, not clean, but great yard, great garage, great brick.
started talking to the homeowner and turns out their redemption period is over TOMORROW (4/30) and they will be on the street. they wanted cash sale, listed for $49.9k. the caviat is that they can pay up to $800 per month in rent. so that's at least $250 less than what i could get if they were not there.
so, i knew i wanted the house. i didn't care about the low rent... so, i went home, did the numbers and offered this:
month to month contract for 2 yrs, i can kick them out if they are not paying and get the house.
rent will be $735
they can cancel their homeowners insurance
they can cancel appliance protection plan
will revisit the rent in 2 yrs
offer is $51.5k cash
the problem was the line of credit had only 33k. talked to my bank and we were going to bundle the last 2, include this one and just buy this one. i thought it was a cash deal, the bank thought they were financing it in a loan.
a day before closing i called to confirm that everything is ok, and they said "no, we have not heard back from the title". i was livid.
luckily i had 20k in another account, but it was out of state. so i had to transfer to local bank. this morning at 6am the 20k showed up. closing was at 12pm. i did 2 wires from 2 different banks and good thing i had the 20k cash.
they almost lost the house and i almost lost the deal. if the 20k didn't show up, i would have used my credit cards to pull cash out this morning.
1 hr before closing, i realized that the 1st of may is in 2 days and i told the agent "want may's rent and 1.5x for deposit" I was so stressed out i had forgotten to ask for that... she said "too late for that, get it later". i said "i am not closing then". we talked to the title and they said "they are getting ~$2300 back, we can just give you the check and they can sign it".
51k w/ $735 rent is still a %17 cap rate. With rents like that in the area, I'm assuming you got excellent equity to0. Sounds like an awesome deal. $20k in the bank can be very useful.
Wow! I got a knot in my stomach just reading that! You are busy- good for you guys!
Also George, I am a realtor so if you ever want to see a house let me know!
Any way that you can acquire!! Congrats on your 18th also that's monumental.
thank you all for the nice words. i am not planning on stopping soon if the opportunities are there. sometimes i have to look hard for them.
@Hillary Van Dusen give me your number, but i generally work exclusively with the listing agents when i am buying.
Nice work! I have 14 under contract.
Congratulations @George P.
Your story is very inspiring and I can't wait to get my first rental. :)
so it begins....
i could foresee the future with this one right from the moment i stepped off the truck to see the house for the first time 2 months ago.
the "tenants" have been dropping hints of "cancer, surgery, toddler issues, paychecks, etc" and finally didn't pay rent for the month of July. The rent was due 7/1 and no check. We texted on 7/2 and nothing.
They got lucky that we went on vacation on 7/2, so we are not posting the "pay or quit" notice on their door. A phone call yesterday didn't help much and they insisted that they will "pay the august rent as well this friday".
the process begins today. my first one in 5.5 yrs.
a "pay or quit" notice was posted on their door last wednesday. yesterday he husband called and was very nice over the phone asking "do we have a problem", meaning he did not know that they were behind on the rent.
today, they went to the bank and deposited the money they owe for July (under $650).
so, they are in the clear for the moment. we will see how long that holds.
it's so important to keep your distance and threat this like it should be - a business!!! the first time they mess up, file the papers the next day!
David - That isn't how a cap rate is calculated. Divide the NOI by the sale price, not the gross rents. Cheers.
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
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!