VICTORY! I finally did it

Real Estate Deal Analysis & Advice
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VICTORY! I finally did it

Nicholas Sheridan, Jr.
Investor · Denver, CO · Member since 2016 · 181 posts · 242 votes

Just closed on my first SFH 2 weeks ago and I am AMPED to have finally defeated paralysis analysis and joined the club. Quitclaim deed has been initiated and the property is officially in the LLC's name. Let the fun begin! Here are the dirty details:

  • Purchase price: $112,502
  • 25% down
  • 3.375% int rate (paid ~ $1,500 in points)
  • 3 bed 2 full bath with 4th non-conforming bed in the basement
  • Detached garage and carport
  • Property taxes $1,127
  • Insurance $1,050
  • Property management 5%
  • Rent $1,250
  • Vacancy rate 5%
  • Maintenance and repairs 6%
  • Oh **** fund 5%
  • Cash flow $421/month

My main issue going forward (like many fellow investors) is having enough capital to purchase more properties. I am able to find great (> 1% on the 1% rule) properties but I don't want to wait 6 months to save up enough cash. Time to get the BP book on no and low money down and also find some partners!

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Scott TrenchPro Member
Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
6y

@Nicholas Sheridan, Jr. in light of your post, we are going to officially relabel the “capex reserve” in our calculators the “oh sh** fund”. This is far more intuitive.

Congratulations on what seems like a great first step!

Podcast Guest on Show #223
BiggerPockets
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  • Nicholas Mann
    Valhalla, NY · Member since 2013 · 132 posts · 84 votes
    6y

    @Nicholas Sheridan, Jr.

    Wow great returns on a solid investment!! Were you planning on doing any repairs or renovations before renting? As of now looks like without any extra money spent you are making about an 18% Cash on Cash return which is amazing!!

    Gray job!

    0Reply
  • Garrison Ushery
    Atlanta, GA · Member since 2019 · 2 posts · 0 votes
    6y

    @Nicholas Sheridan, Jr. Congratulations! I’m also looking to purchase my first deal and I’m experiencing Analysis Paralysis. Any tips on how to move past it?

    0Reply
  • Vivian Chen
    Developer · Los Angeles · Member since 2017 · 2 posts · 1 vote
    6y

    Congratulations! I'm working on my first deal, and it's motivating to hear about first deals. I work for a commercial developer so I know the in's & outs of the business better than most on average. But nothing feels like doing your own deals and setting up your own shop. I'm in LA so I might have to go out of state for first deals because we all know the prices here are ridiculous. Saving up & still in analysis paralysis mode haha. Best wishes on getting to 100 doors by 2025!

    0Reply
  • Nicholas Sheridan, Jr.
    OP
    Investor · Denver, CO · Member since 2016 · 181 posts · 242 votes
    6y

    @Carmen Alvarado no

    0Reply
  • Nicholas Sheridan, Jr.
    OP
    Investor · Denver, CO · Member since 2016 · 181 posts · 242 votes
    6y

    @Nicholas Mann Pretty solid ! I did have to swap out the water heater. the only other repair I did which wasn't needed but I wanted to get it done was replace the garage door. I did some smaller preventative maintenance type work as well

    1Reply
  • Nicholas Sheridan, Jr.
    OP
    Investor · Denver, CO · Member since 2016 · 181 posts · 242 votes
    6y

    @Garrison Ushery just jump in! Start with Who What Where When Why and How and then you just gotta start looking at deals. You wont be prepared for everything

    1Reply
  • Nicholas Sheridan, Jr.
    OP
    Investor · Denver, CO · Member since 2016 · 181 posts · 242 votes
    6y

    @Vivian Chen Thanks! goodluck on your journey

    0Reply
  • Tim JacobPro Member
    Real Estate Agent · Baltimore, MD · Member since 2016 · 520 posts · 379 votes
    6y

    Congrats.  This looks like a decent deal.  I know KC is a cash flow city.  Assuming this is a decent C grade property in a blue collar area you should be able to get decent tenants and pm.  

    I think other than your pm fee things seem fair.  If the pm fee is so low I would consider add ons.  Do they charge a leasing fee?  In a blue collar family neighborhood assuming an average 30 month tenancy for close to a month of first month rent thats 3-4% alone.  If they arent doing that  I doubt they will give eviction protection.  There is small incentive for them to lease properly which is not a good thing at all.  Do they charge add on fees for maintenance.  Usually its 10%.  If you are getting a turnkey property after a thorough home inspection that should not be much but if you start to have to tap into the oh sh××× fund add a little for the pm if the cap ex issues go crazy.  

    I can't see a pm being profitable at only 5% with no add ons and even if they had them its low and should be atleast 8%.  I wouldnt expect a pm to work for you for minimum wage without having problems where it would cost you less to hire someone for more.  I would call some other pms.  You get what you pay for.  An OOS investor that had a property in KC was saying on a bp thread about a month ago of a disgruntled maintenance worker of theirs poured cement down into the sewers of the property.  Fortunately the concrete didnt harden below grade and was mostly flushed out but thats pretty horrible.  Maybe worse than a fire.  I dont know if there is an insurance claim option for that other than cheap add on exterior w/s insurance for tree roots in sewers and other instances.  I'm sure you see my point though.  

    The other analysis seems good and conservative enough.

    Congrats on moving forward.  

    1Reply
  • Gina Cook
    Investor · Long Island, NY · Member since 2019 · 34 posts · 22 votes
    6y

    congratulations! I also just closed my first deal and my second one is closing in the next week or so!! It is such a great feeling!! Love the way you broke down your numbers for us. That $400 cash flow is fantastic. I am in the same boat now as far as coming up with capital to make moves on my next investment. Do you own a primary residence? Do you have a 401k? Sometimes you have to be a bit creative. My husband and I are considering taking a HELOC against our home now so that we can do a BRRR deal or invest in another rental. I saw someone on instagram the other day talking about how they were able to get a SBA loan for 100k with a 30 year term for a rate of 3.75% and they were going to use it to invest in properties! That was definitely unique. Keep pushing. When there is a will there is always a way! :) great job again!

    0Reply
  • Olu Oyelade
    Rental Property Investor · Oakville, CA · Member since 2018 · 23 posts · 7 votes
    6y

    Glad you pulled the trigger and conquered 

    0Reply
  • Salvatore Lentini
    Rental Property Investor · Doylestown, PA · Member since 2008 · 1k+ posts · 1k+ votes
    6y

    @Nicholas Sheridan, Jr. - Assuming a mortgage is when a seller sells their property to you and you basically just take over the mortgage.  This happened to me for the first time a few months ago.  I was working 2 other large deals and this 20 unit came along.  I started looking into it but had no idea how I would finance it with the other 2 deals in the works.  I was glad I stuck around and kept digging and talking with the seller and broker.  Found out it was an assumable Fannie Mae loan (meaning it was allowed - a lot of mortgages are not).  Had to come up with very little for the difference between what was assumable and the agreed upon purchase price.  Moral of the story, don't give up on deals even if you're not sure how you're going to acquire them.

    2Reply
  • Joel White
    Investor · GA · Member since 2011 · 2 posts · 0 votes
    6y

    @Nicholas Sheridan, Jr. - Congrats on your first real estate deal!  It never gets old for me to see investors take action.  Keep your momentum going strong, continue to learn, and you will do just fine.

    0Reply
  • Louis Hamric
    Rental Property Investor · Memphis, TN · Member since 2020 · 27 posts · 5 votes
    6y

    @Nicholas Sheridan, Jr. Congrats on your deal. I see how you got that cash flow. But I would like to recommend you use an app called deal check to run your numbers one more time. I'm not saying you did anything g wrong. But I feel like you may have forgot about a few expenses to set aside money for like capital expenditures, ie roof, ac, furnace, water heater etc... also. Also your taxes seemed kind of low for out of state in Kansas city. Make sure they dont have county taxes due too. Lastly I would up you vacancy rate to 10% as one month vacant is 8%. And that's assuming you find someone right away thats a GOOD tenant. I'm from Memphis we're similar to Kansas city so that part is important. Otherwise great job. Keep up the work. I'm in the same boat as you learning day by day.

    1Reply
  • Steve K.
    Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
    6y

    Congrats on your first deal! Definitely an accomplishment to have moved beyond analysis and taken action. 

    Am I reading these expenses correctly?:

      Property management: 5%/$62.50/mo. ($750/yr.)?

      Vacancy: 5%/$62.50/mo. ($750/yr.)?

      Maintenance and repairs: 6%/$75/mo ($900/yr.)?

      Capex/ "Oh sh*t" fund: 5%/$62.50 mo. ($750/yr.)?

      Total for Capex, maintenance and repairs, vacancy, and management: $3,150/yr.?

      0Reply
    • Jacky Tu
      Real Estate Agent · Madison, WI · Member since 2020 · 20 posts · 9 votes
      6y

      @Nicholas Sheridan, Jr.

      Congrats Nicholas!! Compound that cash flow for your next property and keep the momentum going!

      0Reply
    • Selina Banda
      La Vergne, TN · Member since 2016 · 93 posts · 28 votes
      6y

      @Nicholas Sheridan, Jr. Congratulations. I like your cash flow, and 5% property management fee

      0Reply
    • Arta Montero
      Member since 2019 · 182 posts · 45 votes
      6y

      @Nicholas Sheridan, Jr.

      Congrats Nicholas. So you are from Denver and purchased out of state?

      I am surprised you got such a low interest rate and wondering where you got the loan from.

      Thanks

      0Reply
    • Jordan Graham
      Real Estate Agent · San Diego, CA · Member since 2019 · 54 posts · 27 votes
      6y

      @Nicholas Sheridan, Jr.

      Congratulations brother! Love to see some fellow Colorado hustlers. In terms of getting into another property quickly look into seller financed/ subject to/ and lease option deals!

      I am currently trying to use these approaches as well.

      0Reply
    • Jeff Marzo
      Developer · Detroit, MI · Member since 2013 · 86 posts · 23 votes
      6y

      @Nicholas Sheridan, Jr. Congratulations!

      0Reply
    • Ladè Baruwa
      Rental Property Investor · New York City · Member since 2019 · 90 posts · 122 votes
      6y

      @Nicholas Sheridan, Jr. Nice job on your first deal! Financing will come when you start to get a bit creative, don’t stop!! Best of luck to you!!

      0Reply
    • Yuval Molcho
      Rental Property Investor · Member since 2020 · 12 posts · 15 votes
      6y

      @Nicholas Sheridan, Jr. Congratulations Buddy!! Thank you for sharing

      good luck in future investments. Wait for me on the other side! I'm on my way on making my first remote-investment.

      0Reply
    • Claudine Gentles
      West Palm Beach, FL · Member since 2019 · 2 posts · 0 votes
      6y

      @ Nicolas Sheridan Jr... Congrats! The hardest part is taking the 1st step and getting the 1st one under your belt. It's on from here on out! You got this! Congrats!!

      0Reply
    • Ondrej Brown
      Rental Property Investor · Cleveland, OH · Member since 2019 · 150 posts · 47 votes
      6y

      @Nicholas Sheridan, Jr. Congrats man , really

      Happy for you man. Keep it up !

      0Reply
    • Basil ToyloyPro Member
      Rental Property Investor · Lake Worth, FL · Member since 2016 · 1 post · 0 votes
      6y

      Great job Nicholas, congratulations ! It appears from your deal that you were able to secure a conventional mortgage. Did the bank/lender not mind that you were titling the property in your LLC ?

      0Reply
    • Sam K.
      Rental Property Investor · New York, NY · Member since 2014 · 32 posts · 4 votes
      6y

      @Nicholas Sheridan, Jr.

      Congratulations!!!!! 🥳🥳🥳

      0Reply
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