First two deals under the belt!

[Gunnar Teltow]

I'm reluctant to post this under "Success Stories" since the jury is still out! However, it's a success story in that the BP community has motivated me to finally jump into real estate and make things happen. So thanks for that! Here goes:

Deal #1:

• 1 SFR 3/2 in North County St. Louis (I know, I know)
• $35k all in, will rent for $750
• bought all cash, hard to finance something like that

Deal #2:

• 25 SFRs in the same area, built around 1940-1950 (sample pic below)
• mostly 3/1, 900-1,200SF, expected rents around $550-700
• total cost $640k (about $26k per house)
• came with 80% note, 25yrs., 6%, $3,200 monthly payment
• monthly gross rents currently are about $14k, with 5 vacancies, so total potential monthly gross rent is about $16-17k

There are many on BP who warn against buying rentals in marginal areas (75% of my tenants are S8) but also some who think it's a good opportunity (see Lisa Phillips' excellent post on War Zones).

I used to live in St. Louis so I have people there I know and trust, plus a property manager who has experience and manages other properties in the area. I was initially looking for something to buy in Austin, but after touring a total slum property that barely yielded 1.4% I shifted to St. Louis since most people on BP counsel against buying negative cash flow for hopes of appreciation.

I'd love to hear your thoughts! Good, bad, ugly. Thank you!!

[Jerry W.]

WOW Way to go @Gunnar Teltow ! You are new to investing and smoked past the number of houses I have in only months and I have been doing this for decades. Using the 50% rule right now your expenses should be at least $8K to $8.5K based upon what your total rents should be. Keep in mind you still have taxes, insurance and repairs even on properties not currently rented. I have your payments at $3,300 per month so you have $11K to $11.8K in total costs, so you have between $2,200 and $2,700 in monthly income even with an almost 25% vacancy rate. Any improvement in vacancy rate is mostly profit the way I calculated your expenses.

Lets see you highly leveraged your money, you raised private capital, you used owner financing, you have great cash flow, there is not much you didn't do great on. The remaining tests are to find out if there are any deferred maintenance to take care of from the previous seller, and see how your property manager performs. Very excellent work you are definitely getting a vote from me.