First buy, flip, hold success!!! First deal ever success!!!

[James H.]

We just collected first month's rent this evening! We screened and declined several applicants (even returned a deposit to hold for one declined applicant - took a lot of self control)and finally settled on some tenants that gave us the warm fuzzies and passed the background/credit/rent history/work verification with flying colors!

Here is the breakdown of the deal. Tell me what you think!

Low income working class neighborhood. Not a war zone! Safe at night.

Purchase price + Closing costs = 13,000 cash

Cost to renovate + Appliances= 6000 financed at 12% interest with visa

New central HVAC = 4000 financed at 14% interest with signature LOC at 5 years

Annual insurance = $500

Annual taxes = $600

My time to rehab = every weekend for 2.5 months

Rent = $550/month

Deposit = $300

Leased within one day of completed rehab.First months rent and deposit in hand prior to letting keys.

ARV hard to pin down but conservatively = 35K-40K in current market.

[Nathan Emmert]

So you're paying $720 a year on the Visa, $560 a year on the LOC just in interest?

$720 + 560 = $1,280 / 12 = $107 a month in interest + "equity".

$550 / 2 (50% expenses) = $275 a month

You aren't going to have much cash flow at all on this. You need to try to get a HELOC on that $35 - 40k to pay off the $10k. Get it around 4.5 or 5% interest and you'll cut that interest payment in half or better and you can also extend the terms of the principle payback (depends how "leveraged" you want to be and for how long). That should help you flow cash a little better.

You're meeting the 2% rule ($23k * 2% = $460 a month rent) so you'll be in pretty solid shape if you can get better financing terms. It will also improve your cash on cash position which right now is pretty poor...

With your $13k out of pocket, you want a 12 - 15% annual cash on cash return, you should be looking for $1,400 - $1,700 a year in free cash (beyond equity). With your current terms, you're likely less than half that!