My future just fell into my lap!!

Saxxon Rybski · 2019-08-09T22:38:55-07:00

Investment Info: Single-family residence buy & hold investment. Purchase price: $150,000 Cash invested: $15,000 Property valued at $265,000 with $150,00 still owed on it. I put $15,000 into it and $3,000 in holding it while fixing it up. so all in I had $18,000 out of pocket. Now the ARV is $297.500 so I put $14,500 equity into the house. It currently rents for $1850 a month with a 7.5% management fee plus $60 a month for pool service. The property monthly cash flow is $521.25. What made you interested in investing in this type of deal? I've always had an interest in real estate but I've was always had more excuses and reasons why I couldn't do it so I scared myself away from it. Then I inherited a home, I had no experience in real estate just a little in construction ( I had no clue what I was doing). Since then I've committed all of my free time into educating myself in real estate investing. How did you find this deal and how did you negotiate it? my Neighbor got cancer and had no family to help her so I and my girlfriend became her primary caregiver providing hourly medication and care until she passed. She had decided to trust the property to my girlfriend and me. How did you finance this deal? Inherited home and refinanced the $150,000 still owed into a 30-year mortgage. How did you add value to the deal? I remodeled both bathrooms, new flooring in kitchen and both bathrooms, new kitchen countertops, repainted and light landscaping What was the outcome? We hired a Property management company name "new concepts property management" they Got in rented in one day on the market for $1,850 a month at 7.5 %. My mortgage is $1,130 a month plus we pay $60 a month for pool cleaning. So my monthly expenses on the property are $1,328.75. So after all expenses, the property cash flows $521.25 a month. Not too bad for not knowing what I was doing. Lessons learned? Challenges? To do my due diligence in planning. so I can stick to the schedule and not have to change my plans mid-project. I originally planned to Airbnb the property then I was less than a week away from completing and listing on Airbnb; When I found out that my HOA has a 30-day rental policy so I frantically reviewed my options to sell with my realtor vs going with our property management. After interviewing 4 management companies and speaking to my realtor I decided to rent it out. Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others? The only party I worked with on the whole project was my property managers at New Concepts Property management and I would definitely recommend them I interviewed 4 different management companies and they were by far the most prepared and thought as well as they offered a 30-day guarantee to rent the property after signing or the first month is free

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

I would like to see all the numbers. I would like to crunch all the numbers to see how you really came out with this deal. I cannot understand what you actually paid for the house. Did you purchase the house for $150,000? You said your mortgage is $1,130 per month. Does this include the property taxes and insurance?

$1850 - (7% x $1850 = $129.50) - ($1130) - ($60) = $531.00 cash flow, but what about HOA fees, trash removal, sewer fees, vacancy percent, 8% to 10% for maintenance for a hew water heater, AC, furnace roof, painting, plumbing, drain & sewer repairs, cleaning & repairs when tenant moves. additional costs on top of the 7% management fees for showing the unit when it is vacant, advertising to rent, signing and re-signing leases and many more fees that management companies charge. Then, you can run into a tenant who does not pay, thrashes the unit and you have to pay court costs and attorney fees. If you are running your real estate investing as a business you may have some corporation fees and accountant fees. What about yard maintenance. Almost every yard needs some type of work i.e. removing or trimming overgrown trees and shrubs, keeping weeds at bay and power washing oil from the driveways.

Don't get me wrong. I am not a negative person. I am a realist and we don't live in an ideal world. In some states the landlords have to pay utility bills when the tenants don't pay their utility bills. It is very uncommon for landlords to make tenants pay for rubbish removal and sewer use fees when the sewer use charges are not included in the water bills. The HOA's often fine the landlords for violations and the tenants often have excuses and reasons why they are not obligated to pay.

Does your mortgage include property taxes and property insurance? Post every expense, number and I would like to analyze this property for you to see what your ROI is over a period of 1, 2, 5, 10 and 20 years. You may be surprised to find that you are only earning 8% to 10% on your money, but it you got the property for $150,000 then you made out like a bandit for the short term of 1 to 5 years. After 5 years the average ROI decreases to around 10% and it is time to figure out whether you want to continue to earn 10% on this property, or do you want to sell it and earn 50% to 100% on your money for the next few years by using the equity you have to purchase multi-units that can earn you 50% to 100% to 100% on your money.

You don't get rich by buying single-family properties and living of the small cash flow. You get filthy rich by using a business model where you earn 50% to 100% on your money every year. It is just as critical to continue to crunch numbers after you purchase properties to figure out your next move like a Chess game.

Post all the numbers and let use see how this looks for now and in the future. The big money is not in single-family properties. It is in multi-units and you can often get into multi-unit properties for 30% to 40% less than single-family properties and you can easily make a 100% ROI in the first two years. This is why you have to continue to analyze your investments after you purchase them.

4 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

Okay! I see in your profile where you said you inherited the house with a $150,00 balance on the mortgage. So, this makes for an entirely different scenario, but you should still send all the numbers to see how much you are really going to make from this property and to see whether you want to hold onto it or use the equity to get rich(er).

1 Reply

Bryan Devitt

Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes

7y

@Saxxon Rybski it sounds like it initially, but this is not a successful rental. The missing numbers above point out some of the reasons why. Your biggest "issue" is that you have $150k tied up in a house that even with your numbers only nets you $500/month. You need to sell the house and put the money into something with better returns. With real numbers you're probably at 2% annually, so you're breaking even after inflation and only making money on appreciation of the property

0 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

If there is any appreciation?

0 Reply

Nicholas Baxter

Member since 2019 · 5 posts · 2 votes

7y

@Bryan Devitt How does he have 150k tied up in the house? He only has 18,000 out of pocket. I'm not saying you're wrong, I'm just not understanding what you're saying.

2 Reply

Bryan Devitt

Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes

7y

Originally posted by @Nicholas Baxter:

@Bryan Devitt How does he have 150k tied up in the house? He only has 18,000 out of pocket. I'm not saying you're wrong, I'm just not understanding what you're saying.

Equity is as good as cash. He only has $18k into it but he could have $150k minus fees or so in the bank in a short time and use that to buy multiple properties that will cashflow much more and build much more equity over time. Even with 25% down he could own $600k in property instead of $300k.

0 Reply

Nicholas Baxter

Member since 2019 · 5 posts · 2 votes

7y

@Bryan Devitt so you're saying another strategy would be to sell the house and use the equity to fund a more expensive deal or multiple deals?

0 Reply

Bryan Devitt

Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes

7y

@Nicholas Baxter yes. Once you take into account the money tied up into it with equity the return is horrible. It's a great deal and great flip, but it is a horrible rental.

2 Reply

Nicholas Baxter

Member since 2019 · 5 posts · 2 votes

7y

@Bryan Devitt Ah, that makes sense now.

0 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

No! Sell the house and invest in multi-units where he will make 10 to 50 times more money than by owning single-family properties. Go back to the thread about a week ago where I proved you can make $5 million in 5 years with only $500k, very easily. If people really want to leverage their money they need to think MULTI-UNITS. It is the multi-units that make the most multi-millionaires. I made more than $30 million investing in multi-units since 2001 and I only invest part-time. My full-time job is being a plumbing contractor, general contractor and I have licenses for 8 specialty trades. If they don't remove this post you have to watch my two videos on youtube. Search BLPREI to see why you want to dump this property and get a clear ahead about investing. I purchase many single-family properties when I can make 50% to 100% on my money in 1 to 2 years, but multi-unit properties can get you a returns where you get your entire deposit back in less than a few months (in equity).

3 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

Here is a hot deal for you. Don't bother paying me for this advice.

Here is a 5 unit for sale on loopnet.com. The asking price is $345,000. I would offer $280,000 for many reasons. About 2 years ago these buildings were selling for about $180.000. Today it is $345,000, but it is for sale on loopnet.com. That usually means, they are having a hard time selling it and they are a little more-desperate.

Suppose you pick up the building for $300,000 and you put $90,000 down. This is how the numbers look.

Positive cash flow a little more than $583 per month per unit. That gives you a nice juicy cash flow of $2915 per month and $35,000 per year.

Show me a house that does that for a $90,000 down payment.

The day you close escrow raise the rents $50 in each units.

Now the day you raise the rents you just made $30,000 because you multiply the Gross Multiplier time the increase in rents $50 x 5 = $250 per month x 12 months = $3,000 x Gross Multiplier 10 = $30,000.

End of first year you earned:
You just increased the re-sale value of the building by $30,000
You collect the original cash flow of $30,000 per year
You collect the rent increase of $3,000 per year
Total earned first year $67,980 and you only put down $90,000 on the property.

You raise the rents every year by 5% ($50). By the end of the 2nd year you made $138,960. That is almost $50,000 more than the down payment.

At the end of the 2nd year you have made more than two times what you paid down on the property.

THIS IS A NO-BRAINER if the property is not in a war zone and the numbers could be even better. I will post an image showing what will happen if you raise the rents $100 when you close escrow and when you know how to talk to tenants and how to treat them as humans they will gladly pay another $100 to have a new owner who is going to constantly improve the property and their enjoyment.

3 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

Why is anyone stuck on owning 5 single-family properties when you have investments like this sitting in front of your face. I have a 24-year old friend who works for UPS. He started investing in real multi-units only 18 months ago. His first property was 20 units in Kansas. This year, he purchased more than 300 apartment units in Texas and Arizona. He also uses OPM, but he is the head honcho for every deal.

If you raise the rents on this property $100 when you close escrow you will have earned 100% of your down payment by the end of the first year. By the end of the 3rd year you will have 100% of your down payment back almost 3 times.

1 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

Get 3 people with $30,000 to go in on this deal, if the property fits the rest of the requirements and what can you lose. Most people waste $30k every year on pure crap they don't need like $7 drinks at Starbucks every day.

3 Reply

Dennis M.

Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes

7y

i bought an old triplex for only 39k and it makes 1825 a month in rents ( about the same as this fella gets on a 265k house) .. guess I need to start a success diary

2 Reply

Greg Orlowski

South Lyon, MI · Member since 2018 · 9 posts · 4 votes

7y

Caution - extreme newbie here- in fact this is my first post. I understand that multi unit complexes obviously generate more income, and I understand that a lot of numbers were not accounted for in the OP. However, in reading this, it seems as though having one rental property is not even worth it. Is this true or do you just have to have much larger profit margins? Or just have the house paid off so that you’re cashflowing way more?

Thanks - trying to get my feet wet.

1 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

A business model to purchase property, pay down the loan and live off the rental income is probably one of the worse. You make a little money from rental income, but inflation eats a lot of that up. Living off the cash flow is like adding a little extra to your social security checks. The best business model is to constantly analyze your properties and by, sell, trade up and do whatever it takes to earn 50% to 100% on your investment capital every year. You can do it if you write that in your business model. You cannot do it if you do not have that business model. You can do it by hanging with the investors who are doing it at real estate clubs. BP is okay for asking questions and getting a few snappy answers, but the tidbits of information are too sketchy to get a real grasp on what you need to do.

2 Reply

Ryan IngramBusiness Member

Rental Property Investor · Dayton, OH · Member since 2017 · 247 posts · 225 votes

7y

@Saxxon Rybski, great job! I think you did an awesome job, especially for your first deal. Way to take a situation and be a phenomenal human by helping a lady in need and then consequentially monetize it on the real estate side.

Receiving that much equity is truly a blessing and getting to continue paying down the principal and receiving the tax advantages and appreciation (if it happens great, if not so what) puts you in a great spot.

Later on, if you want to utilize a line of credit to utilize some of the equity to acquire more properties, you have that option available to you. But I wouldn’t consider that or recommend it until you’re comfortable and ready to tackle another deal.

I have a decent amount of single family homes and I also have multifamily properties. Both have their pros and cons, there isn’t a right or wrong. You can make just as much money in both, it just takes different strategies. It really comes down to personal preference.

Congrats again, great work and I look forward to hearing about more of you and your wife’s success!

2 Reply

Bryan Devitt

Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes

7y

@Greg Orlowski having one rental is definitely worth it as long as the numbers make sense. As a general rule of thumb (really rough numbers but good place to weed out the time wasters) rent needs to be 1% of the purchase price to turn a profit. Some places you can get 2% or more but 1% should be the minimum. In higher end areas people are buying for appreciation or very low returns because there is very low risk. A lot of it works out to how tolerant you are to risk and how many headaches are you willing to get paid for. Cheap places with high returns are normally in bad areas with lots of problems (bad tenants, lots of service calls, destroyed apartments, evictions, etc).

2 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

Sorry, but the numbers tell the truth. Investors need to stop using the 1% rule and the other outdated math for analysis. You need to take a deep breath and look at the numbers and charts I have been posting much more closely before you think that the real profits are in single-family properties. Yes! I purchase single-family properties. I purchased 24 properties in Las Vegas within a 1-year period in 2008 - 2009 when I was getting them for 25 cents on the dollar. Only a fool would turn down those properties and many fools were telling me that I was paying too much money and prices would come down even more. Today, N mare more than $4 million on those properties. But, I will never purchase a single family unless I am going to make 50% to 100% on my money the first year.

The following chart is for a typical single family property. My previous posts include charts for a multi-unit property that is currently for sale. If you want to have a negative ROI for the first several years and earn a whopping 10% over a period of 30 years then stick with single family properties. I am sure you don't want to have to be in a higher tax bracket or have to pay some income taxes. If you want to get rich then study the difference between single family and multi-units. Don't pay attention to what you hear. The numbers tell the truth! I have a friend who works for UPS. He started investing in multi-units in Kansas only 18 months ago. This year, so far, he purchased more than 300 units and is currently working on another purchase for more than 100 units. By the end of next year he will probably have more than 1,000 units and I think he is only about 24-years old. You will never ever do this with single-family.

I have to put the images in 2 posts.

2 Reply

Account Closed

Investor · Gardena, CA · Member since 2017 · 445 posts · 398 votes

7y

2nd image

1 Reply

Saxxon Rybski

OP

Member since 2019 · 47 posts · 21 votes

7y

Originally posted by @Account Closed:

I would like to see all the numbers. I would like to crunch all the numbers to see how you really came out with this deal. I cannot understand what you actually paid for the house. Did you purchase the house for $150,000? You said your mortgage is $1,130 per month. Does this include the property taxes and insurance?

$1850 - (7% x $1850 = $129.50) - ($1130) - ($60) = $531.00 cash flow, but what about HOA fees, trash removal, sewer fees, vacancy percent, 8% to 10% for maintenance for a hew water heater, AC, furnace roof, painting, plumbing, drain & sewer repairs, cleaning & repairs when tenant moves. additional costs on top of the 7% management fees for showing the unit when it is vacant, advertising to rent, signing and re-signing leases and many more fees that management companies charge. Then, you can run into a tenant who does not pay, thrashes the unit and you have to pay court costs and attorney fees. If you are running your real estate investing as a business you may have some corporation fees and accountant fees. What about yard maintenance. Almost every yard needs some type of work i.e. removing or trimming overgrown trees and shrubs, keeping weeds at bay and power washing oil from the driveways.

Don't get me wrong. I am not a negative person. I am a realist and we don't live in an ideal world. In some states the landlords have to pay utility bills when the tenants don't pay their utility bills. It is very uncommon for landlords to make tenants pay for rubbish removal and sewer use fees when the sewer use charges are not included in the water bills. The HOA's often fine the landlords for violations and the tenants often have excuses and reasons why they are not obligated to pay.

Does your mortgage include property taxes and property insurance? Post every expense, number and I would like to analyze this property for you to see what your ROI is over a period of 1, 2, 5, 10 and 20 years. You may be surprised to find that you are only earning 8% to 10% on your money, but it you got the property for $150,000 then you made out like a bandit for the short term of 1 to 5 years. After 5 years the average ROI decreases to around 10% and it is time to figure out whether you want to continue to earn 10% on this property, or do you want to sell it and earn 50% to 100% on your money for the next few years by using the equity you have to purchase multi-units that can earn you 50% to 100% to 100% on your money.

You don't get rich by buying single-family properties and living of the small cash flow. You get filthy rich by using a business model where you earn 50% to 100% on your money every year. It is just as critical to continue to crunch numbers after you purchase properties to figure out your next move like a Chess game.

Post all the numbers and let use see how this looks for now and in the future. The big money is not in single-family properties. It is in multi-units and you can often get into multi-unit properties for 30% to 40% less than single-family properties and you can easily make a 100% ROI in the first two years. This is why you have to continue to analyze your investments after you purchase them.

I agree with everything your saying Jack about it not being a good rental and that i should sell it to fund other deals. I actually have plans to refinance it to reinvest into something eles. I dont want to just sell it like i mentioned i inherited the house from a really close friend that passed so it has a lot of sentimental value to me so that is what affected my decision on the property.

yes my taxes are rolled into my mortgage but i did forget about my $260 annually HOA. With that being said its more like $500 a month in cash flow

So i got the house by inhairitance and refinanced the 150k the is still owed into my name that made my mothly mortgage payment $1130. Then i spent 18k in fixing and holding it. I pay $60 a month or $720 annually for pool service and another $250 annually for HOA. Then i have to factor 7.5% for management. All utilities are covered by my tenants including sewer, rubbish removal, water, gas, electrical and tv / internet.

1 Reply

Saxxon Rybski

OP

Member since 2019 · 47 posts · 21 votes

7y

Originally posted by @Ryan Ingram:

@Saxxon Rybski, great job! I think you did an awesome job, especially for your first deal. Way to take a situation and be a phenomenal human by helping a lady in need and then consequentially monetize it on the real estate side.

Receiving that much equity is truly a blessing and getting to continue paying down the principal and receiving the tax advantages and appreciation (if it happens great, if not so what) puts you in a great spot.

Later on, if you want to utilize a line of credit to utilize some of the equity to acquire more properties, you have that option available to you. But I wouldn’t consider that or recommend it until you’re comfortable and ready to tackle another deal.

I have a decent amount of single family homes and I also have multifamily properties. Both have their pros and cons, there isn’t a right or wrong. You can make just as much money in both, it just takes different strategies. It really comes down to personal preference.

Congrats again, great work and I look forward to hearing about more of you and your wife’s success!

Thanks Ryan i am pretty happy with what i did with knowing what to do then mid project having to change my plans for it from an airbnb to renting it. Witch addicted what work i did on it.

I do have plans on pulling equity out for a new investment. I am just educating myself a little more before i just jump in on another without help.

thank you for the support!!

0 Reply

Ryan IngramBusiness Member

Rental Property Investor · Dayton, OH · Member since 2017 · 247 posts · 225 votes

7y

@Saxxon Rybski

Absolutely, you’ve done and you are doing the right thing. Good work.

0 Reply

My future just fell into my lap!!

My future just fell into my lap!!

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