I thought I would share my first deal with the community and give props to bigger pockets for all the great real estate advice that can be found throughout this entire website. I have been reading these forums for 2 years and finally pulled the trigger. It truly is the the best information imaginable. Thanks!
Deal completed on December 1st, 2010:
Townhome (REO) - 3 bed, 1.5 bath, 2 Car Garage
Purchase Price: 38,800, Repairs = 7,000 (This includes a new roof, siding, and a furnace)
Total investment = $45,800
Rented at $850 a month on a 2 year lease.
We financed this conventionally for 30 years @ 4.875
Comparable sales in the area for the same townhome range from 65,000 to 85,000. Majority sell within the 70's range.
50 Percent Rule Breakdown:
P/I = $45,800 @ 4.875 = $243 a month
Expenses = $850/2 = $425
Monthly Cashflow = $182
Note: It took a little time to find this deal as the location is in a very nice suburb of Kansas City where 50 percent rule deals are very hard to come by. I could have bought a rental in the city core and met the 3-4% rule! however, I would like appreciation and manage my investments on my own without fearing for my life (just thought I would throw that in there).
A townhome connected to the one we just purchased just got listed on the HUD website for $44,000. However, it is only available to owner occupants until this Friday. I have private funding lined up to put a cash offer on this townhome as well. It has the same characteristics as the the first townhome we purchased (3 bed, 1.5 bath, 2 Car Garage). However, this one doesn't need much in repairs besides cosmetics. I would like to go in at 35k for this one. I think the listing price of $44,000 from HUD is based on the most recent sale in that community (my purchase right next door) of $38,600 which was a REO Foreclosure. I think they listed it pretty low for the area, there mistake is my benefit! I spoke with the HUD agent and they said they think there was a owner occupant bid on the property so I may not be able to even bid on it. I will keep everyone posted on what happens.
My plan for this property is to fund with private funding and then refinance to a conventional in 6 months.
Thank to all who post on this website and provided me with great insights and information. All feedback to greatly appreciated.
Good luck on these projects! I think your choice to stay in a better neighborhood was a good one!!
Oliver, Nice to see more KC folks on here.
Feel free to email me if I can every help with anything.
Nice deal, and good break down.
I'm hoping to close on my first deal shortly (conventional loan, which is what's causing it to take a little while).
Great prices in those areas.
The numbers look good. Long term leases aren't always so wonderful to do (unless the area has seen rents decline a lot recently). In the months of Nov through Feb, I try to stick with leases that are at 6 months or less; some members of BP will tell you to only do month to month lease terms (so that you can give a pain-in-the-tail tenant the boot in any given month without going into an eviction - just a letter that terminates the lease).
Congratulations, Oliver on getting started. Looks like a couple of good investments.
Congrats On Your First Deal , Sounds Like You Got A Pretty Good One , I'm Also In Kansas City , Good Luck On Your 2nd .!!!! Go Chiefs !
Nice looking numbers.
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