Closed on my first deal!!!

[David Bowles]

Hi BP! I finally did it! I closed on my first house and I wanted to share some of the details, as I feel like I got an amazing deal. Let me know what you think!

The story: @Bradley LaBrie mentioned to me a friend of his was selling one of his small 2/1 houses as he needed a quick buck. I reached out to the seller and after a few contacts, we agreed upon a purchase price of 43K cash. This was right around the time COVID hit, and I got a little worried about spending ALL of my life savings on one small house. I went back to him and asked if he would be willing to allow me to use conventional financing to secure the purchase to which he agreed. Bradley and I were thinking that this particular property would be worth probably around 50-60K current market value. The property has long term tenants in place (650/mo) with what looked like only minor repairs needed (less than $500), and for sure carpet/paint/beautification on the next turnover. The inspection revealed what i thought were MAJOR foundation issues (sagging plates/inadequate support, fungus, dry rot). These turned out to be a super easy fix for the seller as he is a builder! The seller fixed the issue in a day, and post inspections looked great! I was able to secure a 20% down loan on the property at 60K (appraisal came in at 62K). I should mention that we ended up creating an addendum that the seller would reimburse me after closing for any additional funding he received above and beyond the 43K we discussed.

The numbers: 

Purchase price: 43K -- Loan Amount: 60K

Out of Pocket Cost: 1K Earnest Money -- $725 inspections (well/septic/water/home) -- $18,320.64 down at closing -- $125 in repairs (still need to replace a shower surround at some point)

Money back into my pocket following closing 15,640.65

Total out of pocket cost: $4529.99 (with 14K in equity on day 1!)

PITI: $328.65

RENT: $650

Monthly CF: $321.35

Yearly CF $3856.20

Cash on Cash ROI: 85.12%

**The cashflow numbers above are only estimates. I do understand that I didn't account for vacancy/capex/maintenance/management, but as I was able to keep my initial capital so low, I set aside 10K in a reserves account that will replenish itself from rent payments. This will allow me to use ALL of my profits above and beyond the initial 10K to move on to the next deal**

I am currently managing the property, and used the biggerpockets Michigan landlord form to get the tenants into a 12 month lease. The current rental rate of 650/mo would easily increase to 750-800 on the next turnover. If my tenant stays, which would be ideal for me, I may raise the rent to 700 next summer.

This turned out way longer than I thought it would and I probably missed some things as well. As I said, I feel like I hit a real homerun! Not a "get rich overnight" homerun, but a fantastic cash ROI/equity deal for almost nothing down!!! Let me know your thoughts!