Closed on property #26
We started investing in real estate a little over 4 years ago, and closed last week on property #26, a 1960s-built condo in an all-brick C class complex where we already own many units. It's a ground floor unit with central AC, newer kitchen, newer vinyl windows, and came with a long-term tenant.
Price paid - $25,000 cash
Private financing - $15,000 loan, 4 years @ 5%, balance of $10,000 + <$1,000 closing costs paid out-of-pocket.
Here's what the monthly numbers look like:
Rent - $600
HOA - $135
Taxes + Insurance - $85
Maintenance + CapEx - $80 (towards new HVAC in a few years)
Cash flow - ($50) per month
We could break even on this unit by raising the rent to the prevailing rent of $650, but we're already raising the tenant's rent from the very under market $550 she was paying to the previous owner. Even losing $50 per month, which will actually be a theoretical loss because any maintenance and CapEx will be paid only as needed by other units' cash flow, our return on investment is still over 25% from repayment of loan principal.
After 4 years, the loan is gone, we've raised the rent to market level, and our free-and-clear property is paying us ~$350 per month on a $11k investment, or roughly 35%. With a number of our 26 properties similarly being paid off, we should be able to retire at that point if we want to, about 8 - 9 years from when we first started investing. The RE investing path we're following is certainly not a quick road to riches, but compares favorably to 25 years of investing in a 401k.