House #10 – 29006 Northeast Teeters -Another Rental House from Yellow Letters

by Stealthy Rich · Published January 21, 2019 · Updated May 18, 2020

New to our story? check out House #9

April 2014

Hard to imagine this was our tenth deal. In one year we have bought over ten houses keeping 8 of them. Looking back, we can confidently say that holding real estate is our best chance at achieving real wealth and reaching our goal of FIRE.

Acquisition

We were mailing about four to five hundred yellow letters each month. Each mailing, we would receive a few calls and usually buy one deal as a result. 29006 Northeast Teeters was one of those calls. The owner was a tired landlord who was happy to sell to us. The house already had a renter in it, and there was a significant amount of deferred maintenance, but it was in a great neighborhood, and we were hungry for a deal, so we agreed on $95,000 as a purchase price with $2,500 back at closing, so it came out to $92,500. The house had a retail value of $115,000 per our analysis. The renter was paying $1,100 a month as well.

Financing

For this one, we used our fancy interest-only financing through Merrill Lynch, and we took out a loan for $66,500, which meant we had to pony up a 30% down payment or $27,000. Remember, our Interest-only loans were tied to LIBOR and were super-low monthly adjustable rates, of about 2.0%. Plus, it was interest-only, so no principal pay-down meant it was a small monthly payment for ten years. That’s a ton of cheddar to put down, but it meant our monthly payment was only $96.98. That made it all worth it!

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Let’s Do The Numbers

Here’s the HUD from our closing.

Line Item Detail	Amount	Comment
Purchase Price	$95,000	Higher than previous houses, but in a better neighborhood
Down payment 30% used Merrill Lynch IO product	$27,000	30% down on a Interest Only Loan
Closing costs which included first year of insurance	$1638	Closing cost - we got 2,500 back from seller as credit as well
Total cost of deal	$96,638	Includes rehab
Anticipated Rent	$1,100
Monthly Mortgage	$99	Interest only loan tracked at LIBOR. #Winning
Anticipated monthly Expense	$200	Average of $2400 a year in expenses
Monthly property taxes and insurance	$250
Monthly cash flow	$551	Delicious
Rent to Purchase price Ratio	1.16%	This is only a base hit but we couldn't pass one up in this neighborhood and it was already rented so that makes things easy. Also we plan to raise rent.

Net Worth Update

This update is exciting as I’ve crossed the 300k mark since the last update. With this deal, it felt like we were starting to get the hang of this and were able to add assets easily as long as we were able to find excellent deals.