Rental property number 16 is under contract! 2015 has been a great year for rental properties so far even with Colorado having a crazy market. I closed on rental property 15, which is a turn-key rental property last week. I am still waiting for all the paperwork to be finalized before I do a complete write-up on that property. Rental property 16 is not a turn-key, but a local property in Greeley, Colorado. The home came up on the MLS and was such a great deal and I had to buy it, even though I don’t have my bank financing lined up for more rentals yet.
How much was rental property number 16 and how old is it?
Rental property number 16 was listed on the MLS for $91,500 and is a 3 bedroom, 2 bath house with a detached one car garage. In our market this is an awesome price. There are currently 4 houses on the market under $100,000 in Greeley. One of those is a mobile home, one is 348 square feet total and the other two are in horrible shape and in areas I don’t buy rentals. When this house showed up on the MLS at $91,500 I thought it was a mistake, but that was the asking price.
There is one issue with rental property 16 that makes me a little nervous, but when inventory is tight you can’t always buy the perfect house. This house is a two-story that was built in 1885. In the blog I mention I try to buy houses that are newer than 1960, but that is not always possible in a market with few homes for sale. In the entire city there are 233 houses for sale that are not under contract in any price range. There are over 100,000 people in Greeley, which means there are very few properties for buyers to choose from and it has been this way for years. That is why we have seen prices increase substantially.
Why would I buy a rental property built over 100 years ago?
The thing that really scared me about this house and still concerns me is the age. However, the home is actually in really good condition. The house has newer windows, forced air system, siding, rood, paint, carpet, kitchen and baths. This house might actually be the best condition rental property I have ever purchased. With the home having 3 bedrooms, 2 bathrooms and a garage it should make me a lot of money as well.
One of the best things about the house is it is really small. Because the home is so old the smaller it is the better and it is only 1,100 square feet total. That means if I have any major problems or repairs, they will cost less because it is a small home.
How much will rental property number 16 rent for and what is it worth?
I think rental property number 16 should rent for $1,100 or maybe even $1,200 a month in our crazy rental market. The only work it needs is a washer and dryer hookup installed and some paint on the garage. If I use my cash flow calculator I get about $400 a month in cash flow after using property management. The best part is my cash on cash return is around 26 percent! The reason my cash on cash return is so high on this property is I am investing less than $20,000 into it, which is much less than I normally invest once I factor in the down payment, repairs and carrying costs.
When I look at the comparable sold properties in the area I think this house is at least 20 percent below market value. Similar houses are selling for $120,000 or more and trying to get anything nice in Greeley for under $150,000 is very tough.
How did I get rental property 16 under contract in such a crazy market?
I think this house was under priced when it came on the market. I made an offer the same day as it was listed and made a very good offer, which I will discuss once the home has been purchased. I made it very easy on the seller to accept my offer and did end up beating out a couple of other offers that were on the home.
How will I finance this rental property?
If you read my article on purchasing rental property number 14, my bank does not want to loan on any more rentals for the time being. They want to see my 2014 tax return and then they have to take my request for more rental properties to their committee, because I have reached a lending threshold with them of 2.5 million dollars. I feel they will lend me more money, but I need to get my taxes done and give them a plan for how many properties I want to buy in the next year. I haven’t told them about my plan to purchase 100 houses yet.
Even though I cannot get financing on the house yet, I do have a line of credit against my personal house I can use to buy the home until I get long-term financing figured out. Even if my portfolio lender will not give me more loans on new rental properties I am working on a couple of different options with other lenders. I hope to write some new articles on these options as soon as get more solid information on them.
After buying this property I hope to be able to put long-term financing on it as soon as possible. I also hope to get financing lined up for purchasing more properties in the near future. My goal for 2015 was to buy 7 rentals and this will be number 4. I am right on my goal, but it will still be tough finding three more great deals for rental properties the rest of the year. I really would like to keep the amount of 100-year-old rentals at a minimum.