I bought rental property number 11 the end of July and the remodel was finally completed last week. There were a number of reasons it took so long to fix up this property, but not because it needed a ton of work. I have had between 8 and 10 fix and flips the last few months and my contractors were busy working on those. I ended up hiring three new contractors this summer to help speed up the repair process, but it still takes time to fix up a property. Rental property number 11 will be a great rental property and I am actively looking for more rentals.
For more information on my rental properties check out my complete guide to purchasing long-term rentals.
How I bought rental property 11
Rental property number 11 was listed for $94,500, which was an extremely low price. The home was an estate sale and I set up a showing as soon as the property was listed. The house had four bedrooms, two bathrooms and a large detached two car garage. I knew there would be a lot of interest in this property because it was so cheap. Our market in Northern Colorado has increased 30% in the last two years and it is hard to find houses like this under $150,000, let alone under $100,000. I made an offer right away for full price and I was informed they expected more offers and would be reviewing all offers in a couple of days. I discuss how I handle multiple offer situations in detail in this article, but my general philosophy is it is better to pay more than I have to for a great deal than to lose that deal.
I offered $109,152 with the seller paying $2,000 in closing costs. With my portfolio lender I do not need to have an appraisal done when my loan is under $100,000 and I waved my inspection. It may seem crazy to offer almost $15,000 over list price, but even at $109,152 I was getting a great deal! I was informed a couple of days later that the seller had accepted my offer and I closed 30 days later. I was told at closing by the listing agent that they had 17 offers and my offer was not the highest, but the seller though my offer had the best chance of closing.
For more information on how to buy the best rentals which will make the most money, check out my book: Build a Rental Property Empire: The no-nonsense book on finding deals, financing the right way, and managing wisely. The book is 374 pages long, comes in paperback or as an eBook and is an Amazon best seller.
What condition was rental property number 11 in?
The house needed paint throughout and new floor coverings. The exterior needed some paint, the kitchen cabinets needed to be repainted, I needed to install a dishwasher, drywall work was needed, bathroom needed new tile, new lights were needed, new doors and a bunch of other little repairs. Luckily the home had hard wood floors under the carpet on the main floor and the house looks great now. Below you will find a before and after video.
How much did the remodel cost for rental property 11 and what will the returns be?
The total cost to remodel rental property number 11 was about $12,000. I discuss how much repairs cost in detail in this article. Here are the numbers on the cash I had to invest and the expected returns for rental property number 11.
Purchase price $109,152
- Down payment $21,830
- Repairs $12,000
- Carrying costs $2,000
- Commission -$3,275
Total cash invested $32,555
What is my cash on cash return on rental property number 11?
My payment on this property is $544 a month, which includes taxes and insurance. Check out Bankrate’s mortgage calculator to see how I figured the mortgage payment. I just rented this property yesterday for $1,400 a month. If I plug my numbers into my cash flow calculator I come up with a $506 a month in cash flow! Using the cash on cash calculator I come up with a 19 percent return. This is not quite the 20 percent I like to see on my rental properties, but I used a 10 percent vacancy allowance. My vacancies have been much lower than that thanks to our hot rental market.
Future plans for rental properties
I want to keep buying rental proprieties, but I am not going to meet my goal to buy six this year. I have put a lot of money into the fix and flip business and I have not seen very many good deals on rentals either. I will keep looking for great deals and I am actually looking at a potential rental this afternoon!