All Forum Posts by: Brendan Carlson

@Dylan Tanaka and @Nick Peters

Thanks for the warm welcome and I appreciate the resources. I will be sure to reach out in the future when appropriate. I'm so pumped to be a part of this community!

As the title says, I'm looking to buy my first investment property and hoping ya'll can help me figure out if it's a good deal or not. It's a small but nice turnkey SFH (2 bed, 1 bath). I'd be using a property manager. Here are the numbers:

Anticipated Sale Price: $44,900

Down Payment: $8980

Closing Costs: $2500

Repairs: None

Rent: $750/mo

P&I: $167/mo

Annual Income: $9000

Vacancy Rate: 5% ($450)

Mgmt Fees: 10% ($900)

Cap Ex: 8% ($720)

Maintenance: 8% ($720)

Annual Taxes: $1500

Annual Insurance: $550

Annual P&I: $2000

There are also tenant turnover fees that would cost about $650. 

Year 1 (new tenant)

NOI: $3510

Annual Cash Flow: $1510

Monthly Cash Flow: $126

ROI: 13.2%

Cap Rate: 7.8%

Year 2 (assuming tenant stays)

NOI: $4160

Annual Cash Flow: $2160

Monthly Cash Flow: $180

ROI: 32%

Cap Rate: 9.3%

You get the picture.

The potential red flag for me is that my monthly cash flow would be either $180 or $126 -- and this is all dependent on tenant turnover. Let's assume the tenant turnover is every 2 years, and let's also assume that I hold the property for an even amount of years. In this case, we could just average out the two numbers to equal an overall monthly cash flow of $153. That's solid, but a bit lower than what I was hoping for.

Another potential red flag is CapEx. I would only be saving $720/year for CapEx, so if I got unlucky and had to deal with a large capital expenditure, it'd eat up my cash flow.

However, as far as I know the property is in very good condition. So the risk for a large capital expenditure is small. Also, Zillow says the property is likely to appreciate by 5% next year (not sure how trustworthy Zillow is, though).

Anyways, back to my question -- would you buy this home as your first investment property? It seems pretty low risk to me, with a moderate reward. I'm itching to get into the real estate game soon, but also trying my best to not act on emotions. Let me know what you think.

Thanks all!

-Brendan

Hi @Samson C ,

I did not know that — just joined the group.

Thanks for your help and good luck to you as well!

-Brendan

Hi All,

I'm Brendan and I'm a software developer living in Chicago. When the stay-at-home order started, I got very bored very fast and decided to finally pick up Rich Dad Poor Dad. Well, as many others have expressed, it completely changed my mindset on money. I always had the idea that the only way to be financially free was to either be born into a wealthy family or start and grow a successful (traditional) business. Rich Dad Poor Dad opened up my mind to the idea that I didn't have to be stuck in the perpetual 9-to-5, middle-class lifestyle that I had previously accepted as my fate.

Rich Dad Poor Dad led me to the BiggerPockets podcast, which led me to the BiggerPockets website. I've been lurking here the past couple of months and thought it's about time I introduce myself. I've learned a ton so far and have to give all credit to this community. It's an incredible resource, and I hope to pay it forward in the future when I have some experience under my belt.

Anyhow, after two months of learning and analyzing properties, I've finally decided I'm ready to buy my first investment property. I've targeted Lansing, MI because there seems to be ample opportunity for solid cash flow and because I am somewhat familiar with the area as I attended college in East Lansing. I also grew up 50 miles from the Lansing area, and I plan on moving back to Michigan 1-3 years from now. Initially, I was going to save more before investing, but when I noticed how accessible Lansing is in terms of price, I realized I had enough saved up to jump in asap.

While my short-term goal is to buy my first investment property, my long-term goal is to own 50 units each bringing in ~$200 cash flow. I'd like to achieve this goal in 15 years, give or take. At that point I'd consider myself financially free and would contemplate retiring from the 9-5 lifestyle. My first few properties will be residential and turnkey, but as I gain more experience I'd like to venture into the BRRRR world and maybe even commercial.

I'm obviously a greenie, so right now I'm simply hoping to get my name out there, meet others, learn the business, and buy my first property! I love to get to know new people and learn what motivates them, so if anyone wants to meet up (virtually) over coffee, that'd be great! Just let me know. Thanks all -- I look forward to starting this exciting journey with you.

-Brendan