House #3 – 24139 Avidly Wandering – Adding Another Door to the Portfolio
August 2013
Now, we were rocking and rolling with two houses, we had renters, and we had done a pretty significant rehab on the second one. We were now hungry for a third property to continue to build our cash flow snowball. We scoured the MLS and came across 24139 Avidly Wandering. This house was a three-bedroom, two-bath, perfectly liquid home. A “liquid” house for us was a home that is most attractive to our level of tenants and will rent quickly in almost any market. Our criteria are that the home is between 1200 and 1900 square feet, is a three-bedroom, two-bath, with a two-car garage in a well-kept subdivision, albeit older. This type of house always rents quickly for us and doesn’t require a ton of maintenance. We make the tenant take care of the yard, and they are responsible for all utilities.
Financing
We got this one under contract for $73,500. We pulled the trigger again on the Merrill Lynch financing, interest-only, at 2%. We put down $22,050, which is 30%. Our monthly payment was $75.03. Insane
Here are some pics of this jewel. Admittedly, it’s not much to look at, and very quickly, I learned to lower my standards. We aren’t slum lords by any stretch of the imagination, as our properties are clean, safe, and functional. However, we are not “blinging” them out with designer paint or marble bathroom finishes either. Remember this when you go to buy houses. It shouldn’t be a dump, but it doesn’t have to be super luxurious where your mom would want to go on a vacation.
Always a Hiccup…
It wouldn’t be fun if there weren’t a surprise. As soon as we got the place rented with a new tenant, he discovered a plumbing problem. The whole property was backing up. We had to scope the line, and we found that the old terracotta drain line had collapsed. Of course, this freaked me out, and I envisioned lots of money to fix it. In the end, it cost $1,300. They replaced that section of the line, and it was no big deal. This house was now up and running and cash-flowing each month, adding to our net worth snowball.
| Line Item Detail | Amount | Comment |
|---|---|---|
| Purchase Price | $73,500 | |
| Down payment 30% ($5460 from each of 5 partners) | $22,050 | 30% down on a Merrill Lynch IO loan |
| Closing costs which included first year of insurance | $3,100 | First year of insurance, (we paid title policy on this one, also doc fees, and HOA transfers, etc. |
| Rehab Costs | $6,885 | New Roof, main drain repair, make ready |
| Total cost of deal | $83,485 | Includes rehab |
| Anticipated Rent | $1,000 | |
| Monthly Mortgage | $75 | IO loan at 1.75% Sick! |
| Anticipated monthly Expense | $200 | Average of $2400 a year in expenses |
| Property Management | 80 | |
| Taxes and insurance | $225 | |
| Monthly cash flow | $420 | This does not include the principal paydown which is built into the loan |
| Rent to Purchase price Ratio | 1.2% | Rent is a little low to start but i think we can raise it and get this ratio closer to 1.3-1.4 |
Net Worth Update
Andd if yoou don’t have the know-how to truly put
that sink back together again correctly, you might end up with a
much worse problem than you’d if this wass only leaking or dripping.
Local plumbers in Cottage Lake WA will tell you all you need to know about the cloudy
water in the tub. So, using these points at heart, you will
want to possess a few quotes produced by any local heating
companies. http://www.phoenixplumber.org/