My First POST and My FIRST deal... [Nervous about responses...]

8 Replies

Greetings to everyone at BP.  I am a new member here as I just signed up today so I'd like to take this opportunity to say hello to everyone.  I was honestly unaware that this type of a forum existed with so much knowledge coming from novice, intermediate and professional investors alike.

The reason I came here was to learn to become a successful landlord and in a few short hours of reading, I believe I may have cut a year or more off that learning curve.  Now I am curious as to what a few of you think about my deal?  I did this deal on my own and because I BELIEVED it was a good deal, not because anyone told me it was a good deal.

Right before the holiday I closed on a duplex in Bellflower, CA. It's actually two SFR homes on a 10,000 sq ft lot. Each home is side by side, not front to back like the older ones in the area. The property was built in 2007 and each home is a full 3bd and 3 bath 1,672sq ft.

Here are the particulars:

I paid $690,000.  I own the property free and clear.  Both units are rented out at $2,250.  Unit-A's tenant is month-to-month section 8 and has been there for 3-years.  Unit-B's tenant is also month-to-month and is the original lessee from 2007.

Expenses:

Taxes which are 6,500 / 12 = 541
Wate/Trash: $72 every other month
Gardening: $100/mo

I have not allocated maintenance and vacancy costs yet as I am brand new to this...

WHY DID I BUY THIS:

1. The builder and previous owner was a personal friend.  I know the property and area fairly well.
2. The tenant in Unit-B is also the maintenance man so he lives onsite and since he's the original lessee that strategy appears to be working.
3. In that area, most properties are 1950-60's and are bringing similar rents.  Market value on these units are $2,500/mo fairly easy IMO.
4. Being a newer property, long term expensive maintenance hopefully wont be an issue.
5. I feel these units are desirable due to lot size and being side by side.  When you drive by you cannot discern that it is one parcel.  Each homes is nicely positioned on its half of the 10,000 sq ft lot.
6. Lastly the property is worth about $725,000 and we did a deal with real estate fees.

And after all of that, based on what I have been reading, my numbers (in my opinion) won't hold up to what I am reading that professional investors are achieving on this forum...
 

Welcome Anthony.  You're in the right place.  I'm in Lakewood myself, just south of where your rentals are.  Congrats, hope that you'll learn more from here like maxing out your investments through various deal structures like owner financing or subject-to and other investment tool.  What was the reason your friend sold this property?  Did you buy it cash since you own it free & clear?  Is this your only investment property?  For a 10k sf lot, it's enough to build a multi-family apartment building.  Or build several 'zero-property-line' single family homes next to each other & selling them each for what you bought it for.  Will you be looking to buy some more in Bellflower?

@Anthony A.

Hello and welcome to BP!  It depends on how one evaluates your deal.  Anytime you can buy with substantial equity, and likelihood of good appreciation could be considered a good deal.  Then it all depends how real those figures are, and the unknown future.  Is it the best deal you could do given the size of the investment, probably not, but on the other hand your it, now time to think about your exit strategy.

If you have good appreciation that deal could work out well for you.  4%(using 50% rule) isn't a bad return at the higher end.  The down-side of that level of return is that you don't gain much by leveraging.  The plus side is that your downside is more limited.

You may want to get the tenants on leases for a couple reasons.  First is you can build in rent increases to get the rent a little closer to market.  Also having 12 month leases will make it easier to pull out cash by refinancing if you want to get the advantages of cash and leverage on your next deal.

@John Malahay  @Anthony A.  Do you guys know if there is rent control in those area? Bellflower, Santa Fe Springs, Whittier, Norwalk, Pico Rivera, Downey, etc.

I work in Santa Fe Springs and have thought about buying income property near my work. 



Here are the particulars:

I paid $690,000.  I own the property free and clear.  Both units are rented out at $2,250.  Unit-A's tenant is month-to-month section 8 and has been there for 3-years.  Unit-B's tenant is also month-to-month and is the original lessee from 2007.



Welcome to BP! you'll learn so much here and listen to the podcasts. 

You paied $690,000 and own it free and clear, I'm impressed!!!
 

@Larry Fried I really didn't go into it with an exit strategy.  I am a buy and hold type of investor and my thoughts are I would collect the rents as cash flow (and raise them accordingly) and let the property appreciate in value over time.  I didn't crunch numbers that much.  I lookd at the Cap Rate and made a decision.


@Lee Liu From what I was told, at least where my property is at there is no rent control.

@Amanda Young $690K doesn't get you much here... :-( 

Wow, for 690k I could buy 15 properties free and clear in the midwest and have gross rents of 11,250,  If i spent that much on notes I could turn it into 22,500 in monthly rent in 12-18 months.

If I borrowed against them then the sky is the limit....

Yes, I agree.  Things are quite different here than in the Midwest.  Before I built my home, I spent $900K just in the dirt for 21,500 feet...

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