Completed deal with some hickups along the way

[Christian Rojmar]

That was a ride! Acquired a SFH in Overland Park, KS in July of this year and did a decent sized rehab – gutted interior, added HVAC, and added a bedroom. With COVID in full effect, much of the material was back ordered and shipments were delayed. Fast forward, the rehab project was completed in early September, about a month later than expected. Rehab crew was fantastic but not much they could do with the material I ordered being delayed. Here is the interesting part, I had a property manager lined up who, on paper, was fantastic. She new everything there was to know about the market/area, had all the right answers during the interview, and good references…. Fast forward to September and it is time to get the place rented… Week after week goes by and she says that there is a lot of interest but no bites….. Mid-October and she tells me that she doesn't advertise the property on Zillow or any of the other big websites but rather just through Facebook and Craiglist etc.…. When I ask her about it, she casually mentions that the main real estate websites do not help to get a property rented… I let her go and put the property up for sales. We have a ton of interest, but the right buyer does not show up during the first 3 weeks. With the holidays closing in, and less demand during the cold months, we again put it up for rent, this time through my realtor who advertise it on Zillow etc. and within days, we have the place rented.

Lessons learned: Before knowing and and fully trusting the people on your team, do not simply assume that they will do their job as well as you would - Instead of checking on Zillow etc. if the property was up for rent and making sure the property manager was doing everything necessary to get it rented, I just assumed she was. Mistake on my part which resulted in some additional holding costs.

Below are the details of the deal – average deal at the moment but should be a pretty good investment over time – two of the largest  projects in KS are being built approximately 5 min from the property

• Purchase price: $128,000;
• Seller pays $2,000 towards closing;
• 25% down;
• 3.375% interest rate (no points paid);
• $28,500 rehab costs;
• ARV: $180,000 (forced appreciation ~$23,500);
• 3 bed, 1 full bath (added a bedroom);
• Detached garage;
• Property taxes: $2,081;
• Insurance: $1,236;
• Property management ~9% (including tenant placement fee etc.);
• Rent: $1,380;
• Vacancy rate: 6.25%;
• Repairs: 5%;
• Capital expenses: ~11.0%;
• True cash flow $250/month (betting more on appreciation with this particular property).