My first buy and hold

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My first buy and hold

Phil Bottfeld
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.

Thanks for reading,

Phil

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Andrew SyriosPro Member
Moderator
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.

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  • Meghan Reed
    Investor · West Suffield, CT · Member since 2013 · 106 posts · 42 votes
    10y

    Our SF is a B property in a town with great schools so we went on the high end with rent.  It's been super easy to manage thus far as it was our starter home and we renovated/upgraded a lot in the 5 years we lived there.  I'd say we're looking at class B's for the next one(s) as well.  My husband and I both work full time and we have a 15 month old son so we want to avoid the more management-intensive C/D properties.

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  • Michael Orakpo
    Developer · Cleveland, OH · Member since 2015 · 26 posts · 19 votes
    10y

    Congrats on your first buy and hold!! Goodluck yo future investments & keep pounding !

    0Reply
  • Bill ExeterBusiness Member
    1031 Exchange Qualified Intermediary · San Diego, CA · Member since 2008 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Sterling White:

    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 

    Hi Sterling,

    You can not 1031 Exchange properties that were acquired with the intent to flip/sell.  The properties must be held for rental/investment purposes in order to qualify for 1031 Exchange treatment. Properties held for flip/rehab are held for sale as opposed to held for investment. 

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  • Vincent Crane
    Realtor · Atlanta, GA · Member since 2015 · 693 posts · 357 votes
    10y

    Those HOA fees are brutal...

    0Reply
  • Phil Bottfeld
    OP
    Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
    10y
    Originally posted by @Meghan Reed:

    Our SF is a B property in a town with great schools so we went on the high end with rent.  It's been super easy to manage thus far as it was our starter home and we renovated/upgraded a lot in the 5 years we lived there.  I'd say we're looking at class B's for the next one(s) as well.  My husband and I both work full time and we have a 15 month old son so we want to avoid the more management-intensive C/D properties.

     I agree, the C/D properties are for certain people. There are not for everyone, but that does not mean someone can't make a good profit in them either. But I generally stay away from those properties as well. I like the idea of what you did with your home, my wife and I are considering moving into our next home as our family continues to expand, the question keeps popping up... should we sell? Or should we be landlords? I guess time will tell, we have a 13 month old too so I can very much relate to your situation.

    Phil

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  • Phil Bottfeld
    OP
    Certified Public Accountant (CPA) · COOPER CITY, FL · Member since 2015 · 126 posts · 36 votes
    10y
    Originally posted by @Vincent Crane:

    Those HOA fees are brutal...

     Agreed, the rec lease is the largest contributor to the fee being so high.... then again,, the property would have sold for an additional $20K-30K without the rec lease.

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  • Franklin Romine
    Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
    10y

    I would keep the property.  The gain is not significant. 

    I buy and hold.   I'm scared to sell property.


    Frank

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