I'm pretty pumped because, I just closed on #7, paid 100k for it appraised for 125k. I put 20% down from a line of credit I obtained on a different home I bought a little while back. Soooo, I'll be able to do the same with this one and keep the process going. The house cash flows even with both notes being paid. Nothing wrong with the house at all. Just some minimal clean up and shes ready to roll. I bought it foreclosed and the bank performed a remodel complete with granite in the kitchen, new paint, and flooring throughout. I'm a singles hitter, and this one falls right in line. Total portfolio is flirting with the 1M mark, which is my goal by the end of 2016. 3M by 2020 and chill. This site really is awesome, there are no questions I can't find the answers to, and its always great stealing everyone's awesome ideas about how to grow not using your own money. I could have easily paid the down payment, but why use my own money when I can have my tenants cover it for me.
Congratulations on your new acquisition. Your story is very encouraging to everyone and it's good to hear that the BP community shares the success.
Good luck on your journey to snagging #8.
Wonderful and inspirational for someone like me who is just starting out. Keep sharing your future successes.
@Max Shaw The bank remodeled the place for you from what it sounds like. Not bad. What is your projected rent on a project like this?
Nice! Gives me hope.
what would it rent for? what's the cashflow?
Thanks guys! Its been fun being able to grow.
Its not super uncommon for banks to perform their own "flips" in this area. The economy is really strong thanks to The U of A, Walmart (and all the vendors), JB Hunt, and Tyson being in this area. Even during the recession, the market was decent. I listed the property yesterday for $1,025 on Postlets, I have already received 7 responses. Should have listed it for more I guess. The rental market here is out of control. I have not had a vacant month in 2.5 years in any property, people move out Friday and in on Saturday. Its great right now.
@George P. Rough numbers look like this
PITI $650 (20 year AM)
LOC $130 (20 year AM)
So that puts me at $95 a month after all is said and done. Obviously not setting the world on fire, but with $0 money coming out of my personal funds and growing my portfolio with nice, easy to rent properties, it fits my niche.
It's great you're growing the portfolio but I do have a concern. It looks like the cashflow is too skinny and over estimated. You need to factor in property management at 10% of the monthly rent, and then another 10% for monthly repairs, along with your 10% capex. $100 for capex/repairs won't be enough in the long run when it needs a new kitchen, roof, flooring, and bathroom in 20 years. And property management has to be factored in so that you're paying yourself for your time, or if you ever decide you're sick of managing the property that you can have someone else do it. Otherwise it's creative accounting which isn't true. Had to play devil's advocate
Thanks for playing devils advocate.
It is a thin margin indeed, my current goal is to pick up houses, that I at least break even on while managing myself (this house has the thinnest margin of any I own to date due to 100% borrowed money). I'm looking to grow my portfolio with properties in desirable neighborhoods with built in equity from day 1, that will be paid off by my tenants. I walked into this house with around 25k in equity and its turnkey in a good neighborhood that will attract good renters. I probably won't purchase much more until the market comes down a little or hopefully a lot. Cash flow isn't #1 priority, while obviously I care about it and I do not want to use personal funds to support my real estate investments, I'm looking to grow my total portfolio by acquiring and having tenants pay my debt. When its time to retire I will have a nice paid for revenue generating portfolio.
I see, everyone has different goals and if you got a good deal in a great location then it could be worth it for reasons other than cashflow
Congrats on number seven.keep it up
It's pretty entertaining going back to read old posts and goals I set a few years ago.
I looked this post up only because I sold this house a few days ago. This house really did everything I could have asked out of it. I'm going to outline what all I have done since this property leading up to the sale below, not to brag, but to give a real world example that all of this can work. You just have to jump in and trust the numbers and the process.
As mentioned in the OP I bought under market at $100k but it appraised for $125K I was able to pull out my down payment and buy my 8th house. With the 8th house I was also able to cash out refi and bought a tri-plex. So this 1 house has made the acquisition of 4 other doors possible up to this point. But that was 3 years ago.
Since I have owned this property I have had it rented for a decent amount, cash flowing monthly and no repairs needed (this wasn't by chance I knew all of the mechanical items had been in great shape) . That's a little over $6k in cash flow - Not a ton, but decent for something I have little money in.
When my current renters decided to move out I thought now might be a good time to sell as from a demand perspective this house has always been on the low end compared to my other homes. I put around $2500 into it, sprucing it up and making sure I would get top dollar... Which I did - full list price after a week on the market. $149K. The kicker is it only appraised for $144k so I came down to this price.
I took the money from this property and I am closing on a much nicer and newer home with a much higher rent and more cash flow in a few days. I'll have some money left over in my 1031 exchange so I'll most likely find a 2nd property to purchase shortly.
So in summation this one house has allowed me to:
- Pull out my down payment and purchase a 2nd house immediately
- I cash out refinanced that 2nd house to buy a triplex shortly after
Now I'm selling the original house and buying two more houses
So, in the end I acquired 6 doors (almost 1 million in property) made $3,500 cash flow ($6k - $2500) and paid down my LOC in the process
It's rewarding to see the 3 million dollar goal by 2020 in the OP as I have already surpassed that and the new goal is now 10!
@Max Shaw this awesome! Congrats big time...keep it going.
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
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing