I’ve mentioned briefly in some of my monthly updates about looking for a third rental property this year. I actually have been looking at a few properties each week. There was a property I was interested in two weeks ago but the property received multiple offers on the first day it was listed. Needless to say, I didn’t have a chance on that one. Yes, the market here is really hot. Austin isn’t the fasting growing city in the country for nothing. Technically, this property isn’t in Austin but it’s just twenty minutes outside of the city. It’s still a fast growing area.
So last Friday I found another property I liked and made an offer right away. I actually offered $200 over ask since I knew the housing inventory is low and there are lots of buyers. There were other offers on the property but I found out Monday that my offer was accepted.
The house is fairly new (built in 2002) and has had some recent updates including what looks like a new deck and iron/wood fence in the back and laminate flooring inside. It also has privacy since it’s basically in a cul-de-sac and backs up to a field.
Here’s the numbers:
Single-Family Home (built 2002)
3 beds/ 2 bath
1260 sq ft.
Purchase Price: $136,200
Down Payment: $34,050 (25%)
Interest Rate (4.75%/30-year fixed, but I’m still shopping)
Monthly Costs:
HOA – $0
P&I – $532.86
Property Taxes – $254
Insurance – $68.10 (estimate)
——————————
Total $854.96
Rental Estimate:
$1300
Maintenance/Vacancy Costs (15%):
$195.00 (estimate)
Free Cash Flow:
$445.04
ROI (includes 3% closing costs but not maintenance/vacancy):
14.39%
ROI (includes 3% closing costs plus 15% maintenance/vacancy):
8.08%
So these numbers aren’t too bad if I can get at least $1300 for rent. The good thing is that the house is practically move-in ready. It needs one move-out cleaning. The previous owner is leaving the washer/dryer plus fridge which are all still in great condition. I don’t see myself having trouble renting this place quickly. I will look to close by the end of March if all goes well including inspection and appraisal.
My plan is still to have half my investments in equities and the other half in real estate. One of my goals this year was to add a third rental. I will be sure and post more updates as they happen.
Wow, congratulations AAI! Those numbers look pretty solid (8% cash on cash is certainly doable), especially considering how fast Austin is growing.
w2r,
Thanks! Yeah, here in Austin, that’s about as good as I can get on a newer property that doesn’t need much work.
Thanks for stopping by!
Congratulations AAI. That ROI looks solid. I like that you looked for a while, found a property that worked, and jumped on it. That’s how it’s done.
-Bryan
Hi Income Surfer,
It’s nothing incredible but it’s about as well as I have found here around Austin. Indeed, I didn’t hesitate this time. I’m learning still as I go. Plus the markets are always changing. I wanted to get another property while rates are still fairly low.
Cheers!
Brent,
Congrats on adding a new rental property to your empire. You’re going to own a nice chunk of Austin as well as many businesses before you’re done! 🙂
Keep up the great work. Your progress is really inspiring.
Best wishes.
Hi Jason,
Thanks man. Well, I have a long ways to go from an empire haha but one step or property at a time I guess. I wouldn’t mind having 10 properties by the time I’m 40. We’ll see what happens.
I’m happy what I’m doing can inspire others. I’m just working hard and using as much extra capital as I can scrape together to invest in either stocks or real estate.
Keep up the good work on your end also!
Take care!
Brent
Nice home purchase. Also liked your buy on KO. I bought KO twice this month as well. Wanted to get your thoughts on the changes to sharebuilder. Apparently they are doing away with the advantage program with the free trades each month. After 2/28 they are going to a flat fee of 3.95 for automatic investments. Like you I was probably doing about 10 trades per month to DCA into some equities. In the future I don’t know if I will be trading that much. I have my eye on some properties. I guess we are grandfathered in with the advantage program and I hate to lose it but if I don’t continue to make multiple purchases a month I don’t know if it is worth it. Thoughts? Also, maybe you mentioned it before, but do you have a property manager or company in charge of the properties? Something I’m looking into as well as I don’t know if I want to be on call 24/7.
Thanks
Rob
Hi Rob,
I saw that email about them ending the program! I plan to stay enrolled for a while. I love being able to buy small pieces of companies and averaging into them. The way I looked at it was how much I was investing each month. If I invest at least $2400 into ShareBuilder each month then my $12 is only a transaction fee of .5%. So I make sure I’m below this .5% mark. I’m well over that amount in purchases so my fee is small compared to another broker where I’m charged $8.95 per transaction. Now with me saving for a down payment and taxes coming up, I plan to contribute my minimum of $2400 in ShareBuilder next month.
Good luck in looking for houses. My realtor is acting as my property manager but he basically just fields the calls to me. I have a list of service contractors I can use for any repairs. I haven’t had anything huge except a new A/C a few years ago. When tennants move out I get a one-time move-out cleaning and just touch up the paint myself. It hasn’t been much of a hassle really. If you factor in a cost for repairs then all you need to do is make a phone call when there is a problem. It’s very rare that I actually have to go to my rental property once a tennant has moved in.
If you have any more questions let me know.
Thanks for stopping by!
Thanks
Yes I read your blog on the regular along with others. Shortly after checking my Wisconsin Badger home page I shoot on over here to see what you have cooking. Guess you’ll see what Charlie Strong can do for the program this year. I was doing $2400 a month easy into sharebuilder. February I definitely invested more because there were some nice sales out there. I think we even bought some of the same things. Now with my attention focused on rentals I don’t think I will be able to invest that much a month. I suppose if I opt out of the advantage program and stick with the 3.95 flat fee I can still maintain a transaction fee of 0.5% with smaller investments. Decisions decisions.
I am curious as to how you screen and select renters and what you draw up for lease agreements. I live near Madison so renters are easy to find but a quality renter is what I would like for our investment.
Thanks for the information and the blog
Rob
Rob,
I’m super excited to see what the new Texas seasons holds. A large buzz has been created with the arrival of Charlie Strong. We can’t do much worse than the last few seasons anyways.
The $3.95 fee is cheap but I assume you’d still have to buy on Tuesdays. It’s still a lot cheaper than most other brokers. So as long as you don’t make more than 2 purchases a month, you might be better offer on the 3.95 plan. It’s a tough decisions but it all comes down to the number and amount of your purchases.
That’s a good question. My realtor that has acted as a property manager runs a credit and background check. I also check references and verify employment. So far , I’ve had pretty good renters with minimal problems. I’ve only had one bounced check and they apologized and paid the fee I was charged at my bank plus rent within 5 days afterwards. In Texas, there is a standard lease agreement that everyone has to use. It’s the same form whether a realtor or myself draws it up. I’ve seen so many that they are easy to fill out now. This is actually a good topic for a post that I may write up later on.
I wish you luck in your rental search and I hope you share what happens.
AAI
Thanks,
Yeah I would really like to read your write up on the subject matter. Setting up an LLC, lease agreements, and background checks are just a few of the things I would be interested in. You may already have an LLC. And of course the financial numbers too. If a property can income stream ect.
Have a good weekend
Hi AAI,
that looks like a good deal!
For myself, I have too much problems to let a house!
Can the tenant paying the rent?
What can I do, if he don´t pay the rent?
A lot of questions…
In Germany, the tenants have more rights than the landlord!
And that is a problem for me!
Therefore I decided to buy a house for my family and me.
The house is now debt free! Good work 😉
And now, every Euro will be invested in shares…
Best whishes!
D-S
Hi D-S,
Even here in the states, the tennants have a lot of rights. I hope I don’t have to deal with this but I’ve heard the eviction process can be tough. That’s why it’s so important to do your due diligence and screen the renters well on the front end.
Congrats on having no mortgage payment! That’s a huge accomplishment. You are building a nice portfolio, keep it up.
Take care!
Keep up the great work. Be sure to always get great tenants for greater profitability. Look at my blog for tips on getting great tenants and reducing costs.
http://www.nononsenselandlord.com/
No Nonsense,
Thanks for stopping by and I appreciate the support. It looks like you have some great information on your site, I’ll add you to my list and be checking out your posts. It’s great to learn from someone that has more experience, I can’t imagine having 24 tenants!
Cheers
24 tenants, and a full time job too. But with great tenants, it’s like they don’t exist. rent is paid, apartments are clean when they leave.
Cheers to improving your tax benefits for next year! I love how I am in such better shape during tax season compared to my peers where we all make the same at our jobs ( and how I actually came out ahead in income from the remtals
Hi IE,
Thanks! Congrats on planning ahead and not being the norm. You are making some sacrifices now so that you will reach FI early and your peers will still be working until they are 65.
Thanks for stopping by!