Rental Property Number 11 is Under Contract!

rental property 11The fix and flip business has occupied most of my time and attention lately as I have found many great deals this year.  I have still been watching out for rental properties to purchase, but I have seen very few good deals come along that meet my criteria.  Late last week I saw a great deal come through that fit my criteria for a rental property.  The property was listed on a Saturday, and I didn’t see the home pop up on my MLS hot sheet until Monday.  I quickly made an offer and was informed they already had multiple offers on the home.  I made the best offer I could, and I was lucky enough to get the home under contract!

For more information on my rental properties, check out my complete guide to purchasing long-term rental properties.

Rental property 11 house characteristics

Rental property 11 is a ranch home with a finished basement built in 1960 with 3 bedrooms and 1 bath on the main floor and 1 bedroom, 1 office and a bath in basement.  The house has 972 square feet on each floor, has a mostly brick exterior and is in decent shape, but has not been updated for a long time.  The baths, kitchen and windows are all very old, but for a rental I may be able to use them still.  The home also has a large detached two car garage that is over 500 square feet.  The house has carpet on the main floor, but underneath the carpet is hardwood.  I am going to have the interior painted, some work done on the baths, new counters put in, the hardwood re-finished, carpet put in the basement and some other minor repairs done.

What did rental property number 11 cost?

The list price on the home was $94,500, but that is not what my offer was.  I will give all the details on what I paid after the home closes.  Since there were multiple offers on the property, I made a very strong offer with no inspection or appraisal contingency.  If you look at rental property number 9, I paid over $130,000 for that home and I thought that was a great deal.  I was definitely willing to pay more than $94,500 for this one.   Here is a great article on how to win a multiple offer situation.

What will rental property number 11 rent for?

Rental property number 9 has 4 bedrooms, 2 baths total, plus a large office and a large garage and rents for $1,400 a month.  I would be very happy if rental property number 11 would rent for $1,300 a month, but I may be able to get $1,400 for it.  Our rental market is still going crazy with vacancy rates below 2 percent.  I also just rented rental property number 4 for $1,500 a month, but it is a 5 bedroom, 3 bath home.  Here is an article on how to determine market rents.

What will the cash flow be on rental property number 11?

I am going to finance rental property number 11 with my portfolio lender.  I will be using a 5 year ARM with a 30 year amortization and I have to put 20% down.  I won’t tell you the exact price I am buying the home for since it has not closed yet, but using my cash flow calculator I will have about $400 to $500 a month in cash flow.  That figure includes money for vacancies and maintenance on the home.

Future plans for rental properties

My goal was to buy 6 rental properties in 2014 and I have bought 2 so far.  Rental property 11 will be number three and I will be slightly behind my goal.  However, I am way ahead of schedule on my fix and flips.  I currently own 9 fix and flips that are being worked on with one on the market and another under contract.  A lot of my money is tied up in the fix and flips and it will be tough to buy another rental property until I sell some of those flips.  I also have another fix and flip under contract that I just found through direct marketing.  I will have ten fix and flips at the same time in a few weeks, and I think the most I have ever had before this year was 8.

Once I get some flips sold and more capital coming in, I will be able to buy more rentals later in the year.  That is if I can find some good deals to buy!

Having trouble finding a great deal on a house?  Check out my book How to Buy Real Estate Below Market Value, which describes how I buy 10-15 fix and flips a year as well as multiple rental properties.  The book is available as an 113 page E book on Amazon or as a PDF here.

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.


Rental Property Number 11 Has Been Purchased (Video Included)!

This week (July 2014) I bought my third rental property of 2014 and 11th rental property total. I am slightly behind my goal to buy 6 rentals, but there is a lot of the year left to buy more properties.

There are a few reasons I have not bought more rental properties in 2014. It takes a lot of money to buy rental properties, and I have 9 fix and flips going. Since I have to put 25% down on my fix and flips and pay for the repairs out-of-pocket, I have a lot of capital tied up in those properties. Once those properties are sold, I will have a lot of available funds to buy more rentals.

The second problem I have had buying rental properties is the inventory is extremely tight in Colorado. It is tough for owner occupants to find a home under $300,000 that is around market value. Imagine what it is like for an investor trying to find a great deal for under $150,000!

For more information on my rental properties and investing strategies check out my complete guide to purchasing long-term rental properties.

Even with a tight market you can still buy real estate below market value

When the market is as tight as it is now, you have to be aggressive when you find a great deal. Rental property number 11 came on the market for $94,900 and was listed on the MLS. The house was about .5 miles from my office, has 4 bedrooms, 2 bathrooms and an over-sized 2 car garage. Any house under $100,000 is an awesome deal in this part of town. It’s rare to see an 800 square foot, 2 bedroom, 1 bath house with no basement and no garage for under $100,000. When I saw this house so cheap and it had a finished basement as well as a garage, I knew I had to jump on it.

Why was rental property number 11 so cheap?

The house was an estate sale and I learned at closing the old owner was a World War II veteran. The heirs wanted to sell it fast with no issues and that is why it was priced so low. I think they were hoping to generate multiple offers and choose the offer that looked the most likely to close. I was not looking for a rental property, because I have so many flips going but I had not seen a deal this good for months.

How did I end up buying rental property 11?

There was a lot of competition for this house. When I made an offer they had already notified me they were doing highest and best. I did not let the list price influence my offer on this house, because I knew I had to be aggressive. I made an offer of $109,318 with the seller paying $2,000 in closing costs, no appraisal and no inspection.

It is not often I offer $15,000 more than the asking price, but I knew this house would cash flow great and is worth at least $155,000 fixed up. After the highest and best was complete, the listing agent let me know the seller had accepted my offer!

What condition is rental property number 11 in?

Rental property number 11 needs some work as you can see in this video. The kitchen is outdated as well as the baths. The carpet is old, but there are hard wood floors underneath. The windows are old and the home needs paint. The nice thing about rental properties and our crazy rental market is I do not have to make the home perfect to get it rented. I think I can refinish the floors, paint everything, paint cabinets, add a dishwasher, remodel the baths and add some fixtures and it will look good. I figure $15,000 should be enough to get everything done, hopefully less.

Below is a before and after video of the property.

What will rental property number 11 rent for?

I rented rental property number 9 for $1,400 a month pretty easily. Rental property number 9 had 4 bedrooms, 2 bathrooms, an over-sized garage and was in a similar neighborhood. I think rental property 11 will rent for at least $1,400. This property had a larger garage, a nicer yard and an office, which number 9 did not have.

What is my cash flow and cash on cash return?

My mortgage payment including taxes and insurance is about $550 a month. That leaves me $850 in room between my rent and payment, but we have to account for vacancies and maintenance when renting a home. With my cash flow calculator I come up with $510 in cash flow every month.

I have to put $15,000 of cash into the repairs on this house, but I also get back a commission thanks to being a real estate agent. Here is the estimated cash I will have to invest.

Down payment including closing costs: $22,500

Repairs on the home: $15,000

Carrying costs until rented: $1,500 (mortgage payments and utilities)

Commission coming back to me: -$3,200

Total cash invested: $35,800

If I plug in these figures to my cash on cash return calculator, I get a return of 17%, which is lower than some of my other rentals. However, on my other rentals I did not always figure on maintenance and vacancies in the first year since the home will be newly remodeled. In real life, my vacancies have been much lower and my maintenance has been lower as well.

Future plans for rental properties

I am not going to buy any more rental properties for at least two months. At that point I should have a couple of my flips sold and much more capital available. That assumes I don’t do something dumb like buy four more flips. In a couple more months, I should have capital available to buy more rentals and hopefully there are some great deals available!

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.


Rental Property Number 11 is Rented for $1,400; Purchased for $109,000

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 rental properties.

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!

10 thoughts on “Rental Property Number 11 is Under Contract!”

  1. Mark,
    Thanks for your post and congrats. I am new to your blog so maybe you answered this somewhere else in the past or would consider answering in a new blog post or perhaps should just buy your book! My question is how do you determine whether you will fix and flip versus buy and hold? Is it based on the purchase price, repairs needed and ARV or is there some other formula. Thanks for your blog.

  2. congratulations, Mark! Awesome… and inspiring.

    I’m looking at your product offerings.

    1. Does your “blueprint” product cover everything you do?

    2. How do you do EVERYTHING you do, time/hours wise? I don’t see how you’re an active agent (I know primarily in REO), investor, and now property manager company, and author/blogger? This is a HUGE compliment to you, not a critique. I don’t know how you’re doing it all. What does your weekly/monthly split look in terms of hours spent in each role? And how much of your productivity is delegated and/or absorbed by existing admin staff in your real estate office? Regardless, you’re impressive. And inspiring!

    I’m a novice investor. We’re buying our primary residence and have one rental. I’m moving into real estate full time. And am specifically interested in fix and flips to generate cash flow. And long term buy-and-holds.

    It’s challenging in the Seattle market. Prices are nuts. For example, I could sell our rental house for $180K. It rents for $1250/mo. But the CHEAPEST houses around here (15-20 miles of Seattle) are pushing $200K. You might be able to find a run down condo, with high HOA dues, for under $100K.

    Just trying to figure out how, or if, I can replicate what you’re doing there, here in Seattle.

    I’d like to do exactly what you’ve done to date. With my long term goal of 10 buy and holds, right where you are today.

    Thanks,

    Thomas

    • Hi Thomas,
      I sent you an email as well.
      1. It covers much of what I do and it also comes with coaching that helps fill in with any missing parts.
      2. I have a team that does most of the actual work. I work about 40 hours a week, maybe less. I would say 5-10 hours blogging, 5-10 on investments and the rest on real estate team and sales.
      3. It is tough to buy in some markets. Our numbers are definitely better here.

  3. Thanks Mark! your website/blog is great. Working on my real estate license in hopes of becoming a part time real estate investor with it. Will be looking to getting your course after i complete studying for the license

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