Hi Everyone,
Hope you're all ready for the upcoming week! I JUST closed on my first turnkey property in Kansas City, MO and I'm SUPER EXCITED!! I figured I'd document my purchase, to hopefully help newer investors learn more about REI and convince them to take action!
One thing to note is that I'm sure people will say that I could have found a better deal elsewhere or even that I paid too much for this. But I'm still in the honeymoon phase and the most important thing for me is that I finally departed from analysis paralysis and jumped in. I heard starting out is the hardest part. It won't be easy and I'll probably lose money here and there, but every great investor has lost money as well. I hope to take the lessons from this property and be smarter about my investing decisions for the next ones. That's how I'm looking at it.
For over a year and a half, I researched the type of investment I wanted, the markets, and the partners. KC, Indianapolis, Memphis, and Jacksonville were at the top of my list and I went ahead with KC for a variety of reasons but would like to possibly invest in those places down the line as well (when I'm a billionaire!). I have a pretty busy work schedule, so for my first purchase, decided to go with Turnkey. I'm not sure if I'll continue this route down the line but we'll see. I looked at the main TK companies in the market (Norada, USREEB, Bridge, Pinnacle, etc.), spoke to a few of the main people there, and ended up going with Pinnacle because the owner/Founder Mike D'Arrigo seemed to know the market really well and the deal seemed good. The property manager (@Nick McKinnis) was also very responsive and transparent with all my questions. Honestly, I just wanted to get my feet wet and make the purchase in 2017. Also ran my numbers, used Zillow and Trulia, and used the incredibly helpful KC Zip Code map that an experienced BP member made.
Didn't really shop around for loans as much as I had wanted to but ended up going with Shawn Huss at Chemical Bank for 4.625% on a 30 yr fixed with 20% down. I also didn't negotiate closing costs, which I know was a newbie move, but I look at it as part of the learning experience.
There were a few minor updates needed for the property and also an electrical upgrade. All the big ticket items were new and the roof is in the middle of its useful life. I'm still a little nervous about it, but hopefully it'll hold up for a while. After I signed the contract, I ordered an independent inspection (Bulldog Inspections, thanks to a reco from BP). Then I made the decision to fly out there and meet Nick's team and the tenants (. Overall had a great trip and a good feeling in my gut after I left.
The numbers look good to me for now, but I know they always look better on paper. I'm curious to see how things will look in a year or two. Here are my research numbers:
Purchase Price: $80,000
Down Payment: 16,000
Estimated closing costs after credit: $3,100
Total Cash Out of Pocket: $19,458
Mortgage Payment: $330
Gross Income
Rent (monthly): $900
Gross Annual Rent: $10,800
Estimated Expenses (annual)
Property Taxes: $682
Vacancy: $896 (8.3%) But property is currently tenanted through Jan. 2018
Insurance: $836
Regular Maintenance (5%): $540
Cap Ex Reserve (5%): $540
Property Management (10%): $1,080
Performance
NOI (Annual): $6,226.32
Cash Flow: $2,277.73 annual $189.81 monthly.
Cap Rate- 7.8%
COC Return: 11.71%
Hope to send more updates as they come. Please let me know if you have any constructive feedback or questions below. Thanks!
