Our next rental property (SFR + ADU) part 1

Hi, my name is Sebastian and together with my wife Salud, we are starting our rental property journey! We are both Realtors with Keller Williams Realty in Pasadena, CA and we service the San Gabriel Valley. 

We currently live in a condo we bought almost 2.5 years ago. We bought the fixer condo for $295k in Azusa, CA. A 2 bedroom 1 bath condo. We spent about $25k in the renovation process and put down 5% down payment to purchase it.

Our interest rate was about 5% at the time and our (piti) full payment was about $2300 total as the HOA was $250. 

2.5 years later our condo is worth about $380k and our mortgage balance is $260k (so we have a little over $100k in potential equity). 

We refinance 2x now as the interest were dropping. Always when it made sense, meaning that we would save a substantial amount in the monthly payment. 

We refinanced a second time because we decided to keep it as our first rental. Our new interest rate is 2.75% and our new total payment is $1,750 with the $265 HOA. (Properties in the area are renting for about $2150: so that would give us a $300 gross profit).  

We debated selling, but realized that there are no condos in the area under $375k and we do not need the money from the sale at this time. Property values only continue to go up, so we will wait until we feel is the right time to 1031 Exchange the property for a better cash flowing property. 

We were saving money for our next property. We wanted to have around $150k to make sure we could have a cushion and not worry about unexpected expenses. 

We have 6 + months of personal emergency funds. We also have 6 months of funds for the condo mortgage payments. And lastly, 6 months of business expenses. We have the down payment for the new home (5%) ,the closing costs, a 50k renovation budget and a little extra to feel comfortable and secure in the new purchase and to cover the new mortgage on that home for at least 6 months. (I know, a bit or a lot conservative, but our career as Realtors is based 100% on commissions and I believe we all have to decide what is comfortable for us)!

We have extensive knowledge of the real state market out here and have been a Realtor here for over 10 years now, we sell about 18 to 25 homes every year, and we help our clients navigate the world of construction for their projects (ie additions, renovations, garage conversions or new construction ADUs ). This is just to paint the picture and to lead us into the next section or next part to this series in the blog. We are buying the second property we will keep, and in the future, it will be in our real estate rental property portfolio in the very expensive state of California. (Very difficult to buy cash flowing properties out here bc of the very high prices). 

We will go into how to find lower priced properties. (Our property is $550k in a $650k to $700k neighborhood). How to add value to them. How to maximized cash flow. The buying process, negotiation process, inspection process, and execution process after closing escrow! 

This one will be a bit more exciting for us bc it will be ours! :) Follow us along and ask any questions you like. This is meant to educate and provide clarity to this very involved process! 

Part 2 coming soon! 

Sebastian Marroquin 

Our San Gabriel Valley

Keller Williams Realty