First Investment property with rehab almost complete

[Logan Koch]

In February 2018 we found a large SFH in the town I went to College at. We closed on this property mid April, and our family rental business was born.

Purchase price: $113,000 SFH 5bedroom

appraisal value was in the ballpark of $130,000 based on the condition. 

We used a HELOC from my parents home to purchase this property, the loan amount on the HELOC was $140,000. Part of the pitch I used to get my parents on board with this investment, was they wanted to build a new garage at their own property so 20K of the HELOC was dedicated to this.

We put $11,000 into our business checking account to start up, and fund part of the rehab. Also, from May-Aug. we paid a total of $4,000 in holding cost to cover the HELOC payment. From September-April of 2019 we will be making a payment out of pocket toward the principal that will pay down an extra $4,800.

Our cash out of pocket will total at $20,000 mainly to fund rehab and holding cost. 

The total cost of rehab for this project was just under $16,000. 

major rehab break down:

-unfinished attic was broken into 2 large bedrooms 

- new attic window to meet egress

-upgrade electrical 

-carpet second and third floor

-laminate flooring kitchen/bathrooms

-created a new bathroom on first floor. (house only had one bedroom total before, on second floor)

-painted entire house/ kitchen cabinets

We hope to have the new appraisal of this house at $156,000 or above, based on the principal of our HELOC will be at $125,000 in April of 2019 which will be one year after the closing an will give us 20% equity in the property.

Closing on this home in April is usually a bad situation when trying to fill a student rental property. most leases are signed in October the year before hand. Luckily I am rented to brothers of the fraternity I was apart of during school. It takes a lot of stress off of me trying to fill the house each year, and I am able to keep a better eye on the property since having a connection to the guys living in the property. For this Coming school year we have 4 tenants on year long leases, and 1 one a one semester lease, I was very happy to have it this filled at this point in the year. I will also be having a new group of 5 sign for the next school year in a month. 

Rents on the property $26,000. The next school year it will be one lease that all tenants are responsible for the total amount. but it is broken up at $2,600 per semester per person. This also doesn't include any summer leases at $500 per person which will be directed to our CAP EX fund.

A break down of the estimated first year PL sheet

Gross Rent:$23,400

taxes: $1,560

insurance: $590

Water/sewer: $2,000

Gas: $1,900

Electric: $1.500

Maintenance: $1,000

expense total: $8550

NOI: $14,850

Debt: $1080x8months= $8,640

Cash flow (paying toward HELOC principle) $6210

(yes I'm not including Vacancy for this year, I'm also not including Cap Ex this first year either)

utility estimates are based on previous averages, and also our first 4 months

Year two

gross income: $26,000

taxes $1,560

insurance: $590

Sewer/Water: $2,000

Gas: $1,900

Trash(year two electric will be on tenants and we take over trash): $300

Repairs/Cap EX fund: $2,500  (summer rents will be added to this)

Expenses: $8850

NOI: $17,150

Refi Debt (125,000 loan @5% estimated): $8040

Cashflow: $9110 45% COC

Overall this deal is turning out very well, an seems to be an awesome first investment property. Can't wait to Refi and get rolling on the next one. 

IF you have any questions, Comments, or advice please share! Thanks for reading. 

P.S. will post pictures next weekend.