3 Properties, 8 Doors in the First 12 Months

[Chivas Miho]

What an amazing first year this has been!  I just closed on my third long distance rental property from over 4,500 miles away in sunny Hawaii.  This secured me for my 8th rental unit this year, with no signs of stopping.  My partner and I were able to close on a duplex for $33k with minimal repairs expected, but still anticipating $8k - $10k to be spent over the coming months.  I’m optimistic by the end of the month we’ll have tenants occupying the property and bringing in some cash.  

The monthly numbers:

• Gross Rent = $1100
• Taxes & Insurance = ($156)
• Vacancy = ($92)
• Repairs = ($77)
• Trash, Lawn/Snow, Inspection Fees = ($103)
• PM Fees = ($161) based on 80% first month, 8% monthly
• Water = ($46)
• Capex = ($110)
• Total Cashflow = $355/mo, $177/door
• ROI = 9.5%. On years where tenants renew leases, ROI increases to 13.8% since the PM's 80% of first month's rent for marketing and putting a tenant in place is not required.

A couple of lessons I’ve learned during this particular purchase:

1. If you’re scheduling a wire transfer early, call the bank to make sure they completed the wire as scheduled on time.  I foolishly assumed the bank would do what they said, and they missed the transfer time so I needed to close in escrow and delay the final closing a few hours.  Bankers are humans too and it’s just as much our responsibility as it is theirs to make sure they take care of our needs.
2. When in doubt, pay for additional inspections for added reassurance.  Our property had shown signs of termite damage to a structural beam during the initial inspection, and I paid for both a structural engineer (to verify the beam’s integrity was sound) and a termite inspector (to verify there was no active infestation).  The two added inspection reports cost me $650, but it was well worth the cost to have peace of mind that I wasn’t walking into a time bomb.  When the reports came back with flying colors, it gave me the confidence to close on the deal quickly.
3. Having a partner has made the process much easier than taking down the deal alone.  The systems and processes we have built during this year from the previous purchase has really helped us by identifying concerns and how to address them quickly and confidently.  I’m only taking half of the profits, but I’m also paying for half the deal, working half the time, and have the benefit of added motivation to meet my commitments to both my partner and the business.  
4. “Progress, Not Perfection.”  First heard this term on BP Podcast #176 with Tom Krol.  This couldn’t be more true!  I found the process to be easier this time than the first time, but there were still complications along the way - definitely NOT perfect.  But the point is, making progress is more important than being perfect.  

Time will tell how this property really performs, but I’m glad I took action and added this property to my growing portfolio.  Thanks for reading.  Mahalo.