I literally haven’t had an update on my rental properties since June of 2020. I’ve been busy with a couple of sales, several purchases and 2 more pending.
In case you are just now tuning in, my goal with these properties is to get a COC (cash-on-cash) return of at least 10%. This can be difficult to do and has a lot of factors involved but essentially that means if I spend $50,000 to purchase a property, I need to profit 10% or $5,000 annualy. I posted how to calculate it in that link above.
A few other criteria I look for are 3+ bedrooms, 2+ baths, good neighborhood (this is key, Location! Location! Location!), single story, brick home, no pool and meets the 1% rule. The 1% rule basically means that the rent should be at least 1% of the purchase price. So if I paid $100,000 for a property, I should be able to rent it for $1,000. This is a simple rule of thumb for a quick screen.
I’m currently using a spreadsheet that keeps track of most quick information I want to see. This is a shortened version for easier viewing.
So as you can see there have been some changes. I sold my last property near Austin with capital gains of $100,000 that I rolled over into a 1031 exchange. The 1031 exchange marketplace is an excellent place to invest in property and it allows capital gains taxes to be deferred which is also great. I should write an article about that process soon. It was actually fairly easy but now I know a lot more than I did and there are certain rules you have to follow. Basically, it allows me to reinvest the money from the sale without paying capital gains taxes. One of the properties was purchased already and I currently have 2 more under contract.
Property #8 and #9 are currently under contract with numbers being estimates. Both properties are right around a 10% COC return if I achieve the estimated rents I have in my spreadsheet.
The market here in Texas has been crazy. Properties have gone up 15-20% across the board on most of my rentals and I’m not in a big city. This isn’t great if I’m not selling but luckily rents have also increased. I’ve increased rent from $1400 to $1500 easily and waiting until two tenants move out to increase rent in the last $1400 properties, #3 & #4 above. I’ve taken no longer than 1 week to find new tenants on any property I’ve released.
I’ve been very fortunate with repairs. I’ve found some good contractors and handymen and I’ve also done some simple repairs myself. So far my estimates for maintenance/vacancy have easily covered repairs and vacancy (which has been nearly non-existent).
So if these last two properties close as expected in March, I’ll have a net profit after all expenses of $42,750. That’s $3,562/month. That’s a nice chunk of change and covers a lot of my expenses.
In case you didn’t know you can only have 10 government-backed mortgages currently. Counting my primary residence these will put me at the 10 mark. My next plan is to find a small bank that will lend and start putting more money back into my dividend growth portfolio. I’m also looking for and interested in commercial opportunities. There was a commercial property I looked at that needed a lot of work doing to it so I’ll be getting quotes from contractors like Multi-M Contracting (multi-m-contracting.com) before I consider purchasing it. I’ve purchased a 1.5 acre lot that has been cleared and I plan to build storage units on it at some point.
My current real estate page is here: https://www.allaboutinterest.com/real-estate