First deal is closing today! Let me know how you think I did!

51 Replies

I am very excited because my first investment property is set to close today! 

It is a cash purchase, total price of $29,850 (market value/comps 45K, my more conservative estimate is closer to 38-40K) for a 2/1 recently updated (December 2012) and tenanted with new 1 year lease (this was important for me as an out of area investor). Seller agrees to continue PM for first 6 months with option to stay with his PM or find a new one after. Rented for $700 per month and tenant pays all utilities. 

So deal breaks down like this:

Total Price : $29,850     Downpayment/Cash Invested : $1500 

Amount Financed @ 6% using HELOC: $28,350 ($170/month P+I)

Taxes : $125 / month     Insurance : $42 / month    Vacancy/Maintenance: $81 / month

Total Expenses/Month (PITI + Vacancy/Maintenance) = $418

Cash Flow = $282 (first 6 months PM included in purchase so no extra, after 6 mo. will be about $70 less, so closer to $200 CF)

My plan is to refi the property after 6 months to get a 75% LTV cash out refinance to get a better rate and be able to replenish my HELOC for other properties/future investments.

Let me know how you guys think I did on this "hopefully soon to be" first deal!

Numbers seem decent.  You might find it hard to get a lender to make such a small loan.  If they do you will most likely find the loan origination and all closing cost will be high bc its such a small loan. 

Congrats!!!!

@Curt Davis   Thanks! Yes I do have a lender I am working with / have talked to and my purchase price/cash invested in this one is very near their base loan amount, so thats why I decided to hold out for the 6 months and hopefully the appraisal value will come in higher and it wont be such a high cost loan but will still allow me to get back most of my initial cash invested. Thanks again!

Where is the home located? 

Located in Cleveland Heights 

Does Cleveland Heights let your tenant set up water, sewer and waste removal in their name or do you invoice them for this?  I believe Cleveland makes you put this in the owner's name.

@Kyle Kelley  

Congrats on your first purchase!!  Welcome to the investment property owners club.  Your secret handshake is in the mail...

Your numbers look solid.  The one thing I don't like is the amount you've budgeted for maintenance/repairs.  I use $150/month/roof minimum. 

Over 20 years you are going to go through a roof, a furnace and 2 water heaters.  You are also going to see a number of small items bust, break or simply fall apart.  Make sure you have enough in reserve to pay for all of those items when they show up.  If you have a chunk of money left in the pot when you sell the place, all the better.  

TD Bank should be willing to write you a mortgage on the place.

Originally posted by @Rob Strickland:

Does Cleveland Heights let your tenant set up water, sewer and waste removal in their name or do you invoice them for this?  I believe Cleveland makes you put this in the owner's name.

 Typically remains in owners name as unpaid water bill can result in lien on the property.  Also there is a $200 deposit to get the bill transferred to tenants name.  

All of my tenants reimburse once per quarter. 

@Rob Strickland   @Zoran M.    beat me to it - I will be carrying over a similar reimbursement policy that has already been established between tenant and seller

@Aaron Montague   thanks! Good points, I will be saving/reinvesting any cash flow to fatten up the reserves for this and future properties so I could bump that estimate up to $150 per month and still maintain decent cash flow

@Kyle Kelley  - Was this a turnkey property, or an existing landlord exiting the market? 

@Zoran M.   Kind of both - the seller is a local rehabber that fix and flips and fix and holds some properties. This was a fix and flip turned into hold, that he now wants to sell in order to get money for other fixes. 

So not from a "turnkey" company but with similar circumstances from a local seller. Did I explain that right?

The best way to get started is to get started.

Congrats

Great deal, I'd do that one all day long. Are your taxes and insurance figures correct? Seems quite high but it could just be geographical differences. Congrats!!!

@Nicholas Jacoby   Thanks! Insurance may be able to be adjusted down slightly as I dont have the exact policy/pricing for that one yet. As far as taxes go they are accurate, Cleveland Heights has one of the higher tax rates in the Cleveland area

Congrats! what neighborhood of cle hts if you dont mind me asking?

@Jonathan Z.   Thanks! Northern part of Cle. Heights, kind of Noble Neighborhoodish area I guess

Looks very solid, assuming the neighborhood is OK. Some of those properties in bad areas look good on paper, but that's the only place they'll look good on. And as others have mentioned, getting a loan that small may be a challenge.

From what you shared seem like you did well. I like to see the deal being done. It's not as much about the numbers but about the process for a first time deal. 

Congrats!

@Andrew Syrios Thanks!

@Sean Brooks Thank you! The process has definitely been trying at times, but feel like I have learned quite a bit and hopefully I can roll that momentum into future properties. Thanks again!

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