How I used $38k to generate $17k per year with $26k per year potential
For years I have read about real estate investing but never had the funds to get the ball rolling. I finally had some extras cash laying around and needed to put it somewhere so I decided to pull the trigger and buy my first investment property.
The house that I found was 15 years old, had been on the market for 2 years and was valued around $280k. It was multiplex with a total square footage of around 5000. Upon further investigation I found out it was a foreclosure.
The bank was asking $150k. The house was not maintained at all and had many small issues such as leaky sinks, paint, deck issues, exterior doors, leaky gutters etc. I sent the bank a low ball offer of $75K. They responded with a counter offer of $100k, final offer. I accepted.
Once we were locked into contract I spent 6 hours with an inspector, looking over every square inch of the house. After confirming that there were no major structural issues I proceeded with the deal.
Being an investment property, the bank wanted 25% down ($25k). My closing cost were around $5k.
After closing I spent 8 weeks and $5k fixing everything in the first 2 units. In the meantime I started marketing the house with for rent signs, news paper ads, Craigslist, and several other internet sites. By the time the first two units were completed I had 2 well qualified grade A renters paying $725 each per month.
The third unit is currently being renovated with a total renovation cost of $3k. This unit will rent for $650 per month.
With $700 total in operating expenses and $2,100 per month coming in, this house will be generating $17k net income this year.
This deal gets even better. There is currently an integrated garage that is set up to be finished off. The total unfinished square footage is 1700sqft. I estimate that it will cost around $25k to finish off and will generate an additional $650 per month. I plan to use the rental income generated for 1.5 years to finish off the basement.
When it is all said and done, I will have a total of $38k of my own money and $25k of my renter’s money generating a whopping total net income of $26,600 per year!
I can see how real estate investing can be addicting!