91.4% cash yield over two years is not a dream

[Franco Li]

Two years ago I went to a small suburban town to visit some friends, who then complained to me about their exorbitant rents. Turns out an international company was the largest employer in the area and attracted a ton of fresh grads with subsidies for housing, which drove rental rates through the roof. 

Out of the blue, I decided to just check out some properties there and found a cape cod style semi-turnkey for $90K. I already had several investment properties in other locations but didn't know this area too well, but my math checked out, and I spoke with probably 5-8 property managers who gave me awesome and positive feedback. Since $90K for the house is really not a large investment (vs NYC) I decided, why not.

Within a week from closing I found tenants willing to pay $1,500/month for rent. 

Took out a mortgage, paid 20% down; total investment cost for me out of pocket was ~$20K (closing costs, legal fees, etc.) 

For you quantitative folks out there: 

11 months of cash (bc of you PMs) = $17,600 in revenue p.a.

-$2,000 in property taxes p.a.

-$500 for insurance p.a.

-$1,760 in annual PM fees

-$350/month on mortgage (-$4,200/year)

-----

Annual NOI = $9,140

Two Year NOI = $18,280

Cash-on-cash yield = $18,280 / $20,000 --> 91.40%

Best $20K i ever spent! In summary, if I can do it you can too. To all beginning investors out there, sometimes you just have to pull the trigger!

[Mike Reynolds]

Great job. I am working on a value add that I hope does that well the day I finish the project. Deals like yours are awesome to find.