Real Estate Investor · Elkhorn, WI · Member since 2008 · 453 posts · 104 votes
Mike, I've been reading all your posts and hear you preach about how you can find rental properties for 50% of the market value, and where the gross rents are over 2% of the purchase price. I've been skeptical, but being new I figured I would spend some time practicing what you preach. Well guess what? You were right! (I probably didn't have to convince you, just me).
I found a 7 unit rental property. Guy wanted wanted out bad (divorce), and was asking $49k, gross income of $1900 per month. Tenants pay all utilities. Market value was around $95k from what I figured.
The good- those deals are out there! Not easily found, but they are out there
The bad- being new, I reacted too slow. The owner accepted an offer (not mine) very quickly... I was still going over P&L statements and crunching numbers.
I will continue to look for these deals and will not settle for the wrong property. Mike, thanks for making me a believer!
How did you find this deal? I'm getting closer, since the latest ones I've found are about 1.2% vs. the 0.6% on some earlier attempts. But, still not close to 2%.
How did you find this deal? I'm getting closer, since the latest ones I've found are about 1.2% vs. the 0.6% on some earlier attempts. But, still not close to 2%.
I've spent the last year talking to investors and real estate agents. This one came through a real estate agent that I started calling for about 8 months. I call her once every 6 weeks to check in...reminding her of what I'm looking for (financially distressed sellers), what my price range is, etc. It was in northern Wisconsin...not the area I was looking for, but will travel for money :D ). Since I currently live in IL I knew I would have to hire a PM and such, so I told her to only call me on deals where the gross rent was at least 2% of the asking price. That weeds out 99.9% of the listings, and then I can concentrate my research on a very small percentage of leads. This is the first property she has called me on, so one property in 8 months.
Congratulations! You've learned two good lessons here and it didn't cost you a penny. First, you've learned that you can get rentals at a price that will allow you to have cash flow. Second, you've learned that good deals don't last long and you've got to be ready to move. By understanding the math, you won't have to spend more than 5 minutes evaluating the numbers. Then, the next time a deal comes up, you can say YES right there on the spot (after looking at it of course).
Don't worry that it seemed to take you a while to find this deal. Once you've done a few deals, people will call you with these deals all the time.
Have your financing in place so you don't have to go through the process of getting financing, and you'll know what you're going to be paying with just a telephone call!