First Rental!!!

[Sean Autry]

Hey there BP Community-

It has been a dream of mine since college, and 5 years later it's finally happening.  We open escrow on our first rental property tomorrow!  I've been financially ready for probably a year, but honestly taking that leap into the first deal was challenging for me.... The risk; the unknown; I was just nervous.  Finally I told myself that I will NOT be that guy that is just all talk and no action... A week and half later here I am opening escrow.

Here are the details:

• Location: Apple Valley, CA
• Property: 3 Units
  • One X 2 bed/2bath +den
  • Two X 1bed/1bath
• Occupancy: 100% occupied
• Purchase Price: $202,000
• Gross Rent: $2,075/mo (w/ a little room to come up to market)
• Total Expenses (excluding Mgmt Fee; including Reserves): $750/mo
• Total Expenses (including Mgmt Fee; including Reserves): $950/mo
• P&I Payment (90% LTV): $840
• Cap Rate (excluding Interest; w/o mgmt fee): 7.9% 
• Cap Rate (excluding Interest; w/ mgmt fee): 6.7%
• Cash on Cash (after financing @ 90% LTV; w/o mgmt fee): 23.8%
• Cash on Cash (after financing @ 90% LTV; w/ mgmt fee): 13.6%

We plan to manage it ourselves, but have looked at it both w/ and w/o mgmt fees just in case we feel we need management in the future.  Per the current owners, 2 of the units (the larger one and one of the smaller ones) always pays on time.  The last unit is consistently late, pays in partial payments throughout the month, but is always caught up by the end of the month.  (This one worries me a bit).  

The property, though dated (very dated) is still in good shape.  Roof appears to have plenty of life left in it, and no visible damage through the rest of the house as far as I can tell in the initial walk-through.  It's just dated and dirty, though the outside appears to have been freshly painted in the last few years.

The sellers have been great as well.  They've been an open book about the property itself, problems w/ tenants and things to look out for w/ them, and (them realizing this is our first rental) they've been completely helpful in sharing their insights on property management and approaches to it.

Anyway, sorry for the novel.  We've been working on this deal for a week or so and now that I've walked through the property and sent this thing into escrow I can't help but be excited and wanted to share.

And for those of you who want to invest in CA but have heard cash flow investing can't be done- NONSENSE!  It can be done.  It may not be in Malibu, there may not be granite counter tops, and your tenants may not be walking on marble floors... But it can be done... You just have to find the deal, and clearly it is much harder to find in CA than other states.... But they're out there.

Questions and comments are welcome.  Any advice for first time landlords is welcome as well.  We'll have a lot to learn over the coming months.

Sean