Investment Info:
2 BD/1 BA Single Family Home in Evansville, Indiana
Purchase price: $66,016
Cash invested: ~$25,000
This is a turnkey property that was purchased initially at $70,000, however due to some repairs that came up on the property inspection report the price was amended based on the cost of those repairs.
What made you interested in investing in this type of deal?
I wanted to park some money into RE as I had some in stocks, crypto and found that RE has many tax advantages as well as monthly cash flow in addition to principal pay down.
How did you find this deal and how did you negotiate it?
Deal was found on R2R's spreadsheet of available investment properties, negotiations were done based on repairs on the property that needed to be done.
How did you finance this deal?
Conventional financing (30 year note, 3.5% interest rate)
How did you add value to the deal?
N/A
What was the outcome?
The property is now under my name and I'm cash flowing so far (although a small amount)
Lessons learned? Challenges?
Lessons learned:
- Negotiate more based on repairs if they come up on an inspection report, especially if its structured to be paid out of pocket after closing (as this lowers my Cash on cash return significantly)
- Minimum cash on cash return I should be going for is 15%, 7% (Cash on cash return)-10% (cash on cash + principal pay-down) is a rate I can easily achieve through boring index funds on the stock market and likely not worth my time and much more of a liquid investment.
Challenges:
- House had a weird layout that made it a 2 bd/1 ba (utilizing a enclosed sun room as the second bedroom), which gives me some worry about future rents.
- Communication between the PM & the existing tenant was not great during the purchase process (had to reschedule the inspection three times), however communication between myself and the PM after closing has been okay.
- Scheduling repairs after closing has been tough as a result of the holidays & general lack of labor.
Rough estimate of numbers (assuming 5% vacancy, $780/yr in repairs/maintenance, 10% PM fee, $480/yr insurance, $1227/yr property taxes):
Current:
Expected based on Rental increase to $670 (assuming tenant accepts increase, rental increase would be starting 02/01/2022):
Expected if tenant decides to move due to Rent increase (PM company estimates it to be possible to rent at $725-750/mo; keep in mind this doesn't factor in costs to make rent-ready (if any), as well as the cost of getting a new tenant):
