All Forum Posts by: Yazan Ayyash

3/1 SFH bought in 2015...

Purchase Price: $66k (privately financed through a relative)

Renovations: $23k (I paid this myself. It was at least $10k more than what I had budgeted. Chalk that up to having no idea what you are doing)

Initial Rent: $1125

Insurance: $1675 (Lol. Don't ever ask your parents how to buy insurance for an investment property because they'll panic and want you to get a bunch of stuff you don't need. I've gotten this number down 4 years straight, and it's now about $700)

Taxes: $850 (it's up to $1250 now).

Maintenance: ~$700 (like I said, I spent $23k that first year that I bought it, but I have averaged $700/year in the 4 years since. It will probably need a new HVAC soon though)

Management: $0 (I placed the tenant myself back when I was local, but I have moved 200 miles away since. Lucky the tenant has stayed because I plan to outsource the management if he ever leaves. 10% + fees is pretty standard for this area).

Vacancy: $0 (Technically it took me 3 months to get a tenant in from the day I bought it, but he's now in year 5 of his tenancy. Pretty lucky for the reason I mentioned above).

From a budget perspective, I still budget 12% for PM and 8% for vacancy. So from a pro forma perspective:

Gross Rents: $13,500

Gross Rents (net of Vacancy Budget): $12,420

Actual Expenses: -$3,225

Budgeted PM (12%): -$1,490

Total Budgeted Expenses: -$4,715

NOI = $7,705

Financing: -$2640

CoC: 5k/23k = 22%

Note: I've taken all the cash flow (and some other funds) to pay back the principal on the loan from my relative. So technically my CoC% has dramatically gone down since. However, I only owe them $10k from the original $66k, and the house is worth $135k from the original $89k all in price.

Here's an example of how "forgiving" real estate investing can be.

My first investment was in 2004 and I bought it sight unseen. My father-in-law was a REALTOR that said it was a "great investment" but the truth is, he was a mediocre REALTOR and didn't know anything about smart investments. I didn't know that at the time and just bought the property based on his advice.

It was a townhome. One month after buying it, the sewer backed up but it was a simple fix. The next month, it happened again and we had to replace the entire sewer line and cut down a tree ($6,000 total). The next month, I received a letter from the HOA telling me to pay a $3,700 special assessment for the roof and siding. My father-in-law had failed to tell me about this despite several warnings.

Long story short, I paid $6,000 down and then another $10,000 in repairs and HOA assessments in the first four months. After that, the tenant's rent paid for everything and I never put another dime into the property. I sold it eight years later for a $70,000 profit.

This investment is proof that even an idiot can make money in real estate investing if you just hold on long enough.

I understand what you are both saying about NOI being the most important. But if you buy a place and put in a new roof $50k roof, 2 new retaining walls$25k , and replace all the furnaces and AC $75......These big capex items won't increase NOI but I can guarantee this will increase the value of the property (i.e. a buildings cap rate can change) This cap rate will still be heavily dependent on local markets so it won't change much.

thanks for the responses