Celebrate the small victories! Bought two, closing on two more.

[Joshua Beall]

I'm at the front-end of my real estate investing journey, and I don't have any huge wins, but I do have some small wins that have been encouraging, and I wanted to share.

I spent about a year getting educated--attending REIA meetings, reading and listening to BP and other real estate sites/podcasts, and researching my local area. I was really hoping to get a flip for my first purchase, but every offer I've put out there has been rejected so far.

I made plenty of good contacts at the REIA meetings I attended, and one of them was a property manager who had a number of properties for sale. I spent an August day touring properties he either managed, owned, or was remodeling, and after some more careful analysis, I decided to pull the trigger. Here the numbers on my first property:

• Acquisition: $50,000
• Cash to close: $14,000
• Mortgage PITI: $329
• Management, Repairs, CapEx, Vacancy, Utilities: $360
• Monthly rent: $850
• Monthly cashflow: $161
• Cash-on-cash ROI: 13.8%

Not a killer deal, but it's great to finally be making forward progress! The utilities are minimal, I would only need to pay them during a vacancy, and during vacancies there won't be much use of utilities. For management, repairs, capex, and vacancy, I am estimating 10% of monthly rents for each of them.

Next, in November, I found a similar property; acquisition cost was $60,000, and it is netting me $190 monthly cash flow and is about 15% cash-on-cash.

Then, this month I found another two properties that should cashflow very similar to my first property, maybe a little better, but I'm modifying my purchase strategy a bit: I've got a HELOC that I'm going to use to pay cash for the properties, which helped me get a slightly better deal on the purchase price. Then, I found a local bank that is willing to do a cash-out refi via a 5/5 ARM with 30 year amortization, no seasoning requirement, and they'll go 85% LTV.

So, I'm going to buy these two cash with my HELOC, get them rent-ready and place a tenant in them (expect to be able to get $850 for both), do a cash-out refi, and hopefully have most of my money back out of these in 90 days, ready to roll on to the next one.

I'm still very interested in doing a flip, if I could get an offer accepted. I think my rehab numbers are just not tight enough; on every property I've made an offer, somebody else was willing to pay more for. I guess I need to go re-read the BP Books about that :-)

My personal goal is to purchase a total of six rental units this year that will net me at least$100 on monthly cash-flow, after accounting for all expenses. We'll see how it goes! You all can try and keep me honest :-) Assuming I can successfully close these two units in February, then I only need four more before the year is out to hit my personal goal.

Maybe I should 10x it and make it 60 units this year!?

  -Josh