Here's the deal:Purchase Price (PP): $95kRenovation Budget (via HML): $60kTotal All-In Cost: $155kARV (After Repair Value): Around $200kRefinance (via DSCR Loan): 7% interest, 30-year fixedRefinance Details: After the refi, I will pay back the Hard Money Loan (HML) at 11.95% with 3 points:HML: $60,000Interest/fees: $3,585Other costs: $1,800Total to pay back HML: $65,385After the refi, I will have $84,615 left in cash.Cash Flow & Expenses:Expected Rent Income: $1,700/monthProperty Management (PM): $126/monthInsurance: $100/monthTaxes: $126/monthMortgage: $1,043.75/monthTotal Expenses: $1,395.75/monthSo my monthly cash flow is about:$1,700 - $1,395.75 = $304.25/month in cash flow.Return on Investment:Cash Invested After Refi: About $18,385 (after paying off HML and closing costs).Annual Cash Flow: $304.25 * 12 = $3,651Cash-on-Cash Return (CoC): $3,651 / $18,385 = 19.8%I didn’t account for maintenance costs since it’s a full gut rehab, and everything is brand new.

As you alluded to, sometimes a passive note investment purchased for monthly payments “goes south”, and becomes an active participation investment, with plenty of additional capital required for legal fees, forced place insurance, and property taxes.  

I'm a new investor (just closed on our first rental - a long-term duplex)!

We're just about to close on our second STR, in Arnold CA.

Next property will find a professional Realtor who is experienced with marketing their listings and closing deals.

Have reserves for vacancies, repairs, and closing costs.

Very few know what they are doing and can actually close on a loan.

Agents can close more deals, sell more units, and earn bigger commissions, all without large-lot requirements or rezoning hurdles.

Closing on a condo next week. 2 bed 1.5 bath 1100 sqft. 

It is an expense, but they keep it all legal and compliant.