Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
I purchased my first home when I turned 25, and was able to save enough money to purchase my first investment property at age 28. I purchased the condo for $88,000 and after rehabbing the property, I was able to get it rented out within six weeks at $1,250/month.
Here are my annual numbers
Rent- $15,000
Insurance - $600
HOA - $5200
Taxes - $2,000
Maintenance - $400
Annual NOI - $6,800 resulting in a yield of 6.5%, as I am in the property for $105,000.
While the property did not generate the cashflow I expected, (mostly due to my rental rate being wrong in underwriting, and I spent $5,000 more than I expected in rehab, the property is now worth $130,000. Essentially I can flip the property and make $15,000 after closing costs considered today. Not a homerun for most flippers, but I bought this for the intention of cashflow and this property has done well.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
10y
Hey Phil, looks like a very solid deal, congrats! Looking at the numbers, though, it looks pretty tight as a hold. I doubt you can keep up at $400/year maintenance, especially if you have a solid turnover. And that doesn't include vacancy or any debt service. Condos are tough to cash flow usually because of the HOA. I think this one makes sense to flip, pocket the profit and move on to the next deal.
Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
10y
Hey Phil, looks like a very solid deal, congrats! Looking at the numbers, though, it looks pretty tight as a hold. I doubt you can keep up at $400/year maintenance, especially if you have a solid turnover. And that doesn't include vacancy or any debt service. Condos are tough to cash flow usually because of the HOA. I think this one makes sense to flip, pocket the profit and move on to the next deal.
Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
10y
Thanks Andrew for the feedback! This forum is a great place to find like-minded people. We are actually in the process of flipping a condo in the same development, we have found that seniors enjoy the community and the amenities so on a prospective basis we are doing just that, rehabbing the community while simultaneously generating quick capital.
Realtor · Atlanta, GA · Member since 2015 · 693 posts · 357 votes
10y
Rather than doing a flip I would recommend doing the BRRR strategy which you're halfway through. Keep it as a rental as long as the cashflow is $200 per month, and use that money that you cash out to buy and rehab the next rental, rent that one out too, then cash out refi again and buy the next one. Infinite returns with the same amount of initial funds. Congrats though on jumping in
Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
10y
Thanks Vincent, my goal is to flip a few properties in order to generate to enough capital to get a large enough of rental portfolio. I'm going to try and flip a property once a quarter and then purchase a new property once per year with the proceeds from the flips. What do you think? Is your strategy similar?
Investor · Phoenix, AZ · Member since 2009 · 15 posts · 9 votes
10y
You did great - but I'd be looking for a higher ROI.
You can sell and get two more at half the price, OR, you could sell it at the increased value with owner financing. That way you're off the hook for HOAs, taxes and tenant issues. You get all the income without the responsibilities. You can later sell all or part of the note, and the accumulating income can go to buying the next property.
The downside is that you lose some tax benefits, but if you buy and hold properties in an IRA, you already get tax benefits.
Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
10y
Thanks Nancy! I agree, I want my cash on cash to be in the double digits. What kind of metrics are you looking for? My hiccup is/was this, I know I want to be in Class B properties and I bought this right off MLS, below what other things comparable went for, but not steeply discounted. I am going to try and pull equity out for my next venture. Thank you in advance.
Indianapolis, IN · Member since 2015 · 125 posts · 50 votes
10y
Did you pay cash??
If so, that's a lot of money tied up for a small cash flow. Buying this thing all cash, doing a value add, and getting it rented makes you look like a flipper. If you leverage the condo, it probably won't cash flow anymore.
I would sell it and invest in higher cash flowing properties using leverage. Or if you don't want rentals, do another flip.
Did you pay cash??
If so, that's a lot of money tied up for a small cash flow. Buying this thing all cash, doing a value add, and getting it rented makes you look like a flipper. If you leverage the condo, it probably won't cash flow anymore.
I would sell it and invest in higher cash flowing properties using leverage. Or if you don't want rentals, do another flip.
Thanks Wells! I agree, I did use leverage so my Cash on Cash is a little higher than what my NOI/Equity is, however I only have $35K of debt on the property.
Your HOA is $5200 per year? What do you get for that? Seems high compared to what I'm used to.
Unfortunately my condo association has a rec lease we have to pay the developer in the amount of $210/ month, the other fee of $220/month covers all the other traditional costs an association covers (amenities, insurance, etc.)
Rental Property Investor · Arlington, VA · Member since 2015 · 160 posts · 53 votes
10y
Hey @Phil Bottfeld. Great job on the first deal! I'm working on my first Buy and Hold/House Hack as well. I did have a question for you. You mentioned that the first home wasn't bought at a deep enough discount because you found her straight off the MLS. Then you mentioned that your currently working on another home in the same development.
I was wondering, did you also find this home off the MLS? Or did you have another source for this new lead?
Hey @Phil Bottfeld. Great job on the first deal! I'm working on my first Buy and Hold/House Hack as well. I did have a question for you. You mentioned that the first home wasn't bought at a deep enough discount because you found her straight off the MLS. Then you mentioned that your currently working on another home in the same development.
I was wondering, did you also find this home off the MLS? Or did you have another source for this new lead?
Hi Sam, great question… did I learn my mistake? Quick answer... no. But I did some things to put myself in abetter position. First, I got my RE license, second, I started looking in multiple places for opportunities which include…..
1) Wholesale lists
2) For sale by owner listings in my community's newspaper
3) Craigslist (not a huge fan)
4) MLS (DOM below 7 and DOM above 200)
The one place I have not started looking that I will plan to, is pre foreclosure lists from locally distressed banks. Banks who have a greater percentage of borrowers in default are more likely to want to provide a greater discount than are the healthier banks.
However, just because MLS is marketed as full retail does not mean deals can't be found. I put a quick hit search with my metrics and unit came available (it's an REO) that showed up at 60% of ARV and the bank was allowing one day for offers. I dropped everything, ran to the property that night and submitted my offer the same day. Now we are in waiting game to see if the bank will play ball. It's all about the numbers though, no emotion. If they come back too high I will have to walk. I'll let you know what happens!
@Phil Bottfeld. I like it. #noemotion. I'm interested to see if the decides in your favor. Definitely follow up either way! :)
Thanks Sam! You mentioned you were in the works to do your first B&H. What stage of the process have you reached? I remember feeling very fulfilled at closing as if though I accomplished something I had always been shooting for.
Rental Property Investor · Arlington, VA · Member since 2015 · 160 posts · 53 votes
10y
As of right now we have completed a CMA on the home. My wife and I will have enough for the deposit in Feb. So realistically we probably won't close until March. We are rent hacking right now. 5 bed 2.5 ba. we live down stairs while renting the three rooms up stairs. We agreed with the seller we would pay slightly below market value because of renovations needed for the house.
They they are going to "gift" us back cash in their equity payout for those renovations. After that we're going to keep managing the house but now we'll be gaining the equity. Once thats complete we are looking to acquire more property to rent out. Currently we're looking in the greater Atlanta area. Our end goal is to begin investing in vacation homes.
As of right now we have completed a CMA on the home. My wife and I will have enough for the deposit in Feb. So realistically we probably won't close until March. We are rent hacking right now. 5 bed 2.5 ba. we live down stairs while renting the three rooms up stairs. We agreed with the seller we would pay slightly below market value because of renovations needed for the house.
They they are going to "gift" us back cash in their equity payout for those renovations. After that we're going to keep managing the house but now we'll be gaining the equity. Once thats complete we are looking to acquire more property to rent out. Currently we're looking in the greater Atlanta area. Our end goal is to begin investing in vacation homes.
What are your next steps?
That's an interesting way to generate some income! It's interesting you mention the Atlanta area, I'm considering my next B&H to be there in one of these suburbs…
1) Marietta
2) Snellville
3) Ackworth
4) Douglasville
But I first want to flip a four properties annually for the the next five-seven years and generate enough capital since B&H generally require to have capital tied up for an extended period of time. After a year of flipping, I plan to purchase my second B&H and continue purchasing at least one per year on a roll forward basis. (Goal is to have $10K+ of passive income monthly).
My niche is senior housing. Down here in South Florida, Seniors and housing for them is plentiful. They make great tenants and are good for a comical relief when you need it.
Rental Property Investor · Indianapolis, IN · Member since 2014 · 554 posts · 153 votes
10y
Congrats on your first deal @Phil Bottfeld as @Andrew Syrios stated above its pretty tight margins with a low maintenance calculation. Sell the property and do a possible 1031 exchange into a buy & hold
Investor · West Suffield, CT · Member since 2013 · 106 posts · 42 votes
10y
Great job for a first investment @Phil Bottfeld. You've gotten your feet wet, gained experience and you made some money on this one. Keep rolling the snowball.
Great job for a first investment @Phil Bottfeld. You've gotten your feet wet, gained experience and you made some money on this one. Keep rolling the snowball.
Thank you Meghan! That's the plan. Little snowballs now will make avalanches later.
Great job for a first investment @Phil Bottfeld. You've gotten your feet wet, gained experience and you made some money on this one. Keep rolling the snowball.
Are you a cashflow investor with B&H investments or do you prefer other methods of investing?
Investor · West Suffield, CT · Member since 2013 · 106 posts · 42 votes
10y
Hi Phil,
Yes, I'm a buy and hold investor searching for my second property. My husband and I currently have only one SFR in addition to our home. We're doing a second viewing of a duplex this weekend so if all goes well we should have a couple more units soon. I'm trying to turn our snowflake into a snowball as well and hoping to pick up at least 3 more properties next year.
Lender · Fort Lauderdale, FL · Member since 2015 · 117 posts · 22 votes
10y
Hi @Phil Bottfeld the first deal is always the hardest making a $15,k profit is a really good start. One thing that I have noticed is that HOAs in condos and townhouses eat at your profit.
Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
10y
Originally posted by @Account Closed:
Hi @Phil Bottfeld the first deal is always the hardest making a $15,k profit is a really good start. One thing that I have noticed is that HOAs in condos and townhouses eat at your profit.
I agree, the HOA is really hurting my overall cashflow. The reason I was able to buy on the lower end was largely due to the fact that I was buying the property from an out-of-town/recently inherited heir who just wanted to get rid of it. On my future B&H deals, I will be more critical of what my realistic rents will be, I thought I was going to be able to get $1350/month.
Yes, I'm a buy and hold investor searching for my second property. My husband and I currently have only one SFR in addition to our home. We're doing a second viewing of a duplex this weekend so if all goes well we should have a couple more units soon. I'm trying to turn our snowflake into a snowball as well and hoping to pick up at least 3 more properties next year.
That's great Meghan, I think SF offers an ability to generate a greater spread on profits that do my condos of South Florida. Each SF can essentially be reshaped with more/less bed and bath that provides untapped potential. What class of property do you generally go for? Is the duplex in that same class?