Rental House #16 – Yellow Letters again For The Win!
8-2014
Rental House # 16 – 23319 Vented Earwig
With our first two duplexes under our belt, it felt good to get a “normal” lead again. We were mailing yellow letters to about 500 homeowners twice a month. Once again, we got a hit on a letter for 23319 Vented Earwig. This deal was a classic story of a tired landlord who had just experienced a vacancy and was ready to sell the house because he didn’t want to go through the process of leasing it again. We might be starting to sound like a broken record, but each of these deals makes us so happy because we know this is the easiest and cheapest way of acquiring property and building serious net worth. The more we can get, the faster we can grow and reach Financial Freedom.
Front of Rental Home
This particular property was a three-bedroom, two-bath house with 1360 square feet – Liquid gold. It was built in 1982 and was very clean throughout, albeit very basic. In our business, basic is good; basic equals cash flow and consistency. This house had simple bathrooms, new carpet in bedrooms, and hard floors in common areas and kitchen. After a good negotiation, we got this house under contract for $82k with $2k from the seller at closing, so $80k total. It was easily worth $110k. We didn’t even have to do anything to it. It was ready to go. The quickest deal we had done thus far for sure in terms of getting it rented and producing cash.
Financing
Once again, we called on our local banker and got a 20-year loan at 5.125%. This loan made our monthly payment $441 each month. The note was for $65,600 or 80% of the purchase price. As soon as we closed on the property, we listed it immediately and got it rented for $1,100. We were so happy as this was a massive win for us. That translated to a substantial 1.38 rent to purchase price ratio. That’s how winning is done.
Rental House Pics
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Let’s Do the Numbers
| Line Item Detail | Amount | Comment |
|---|---|---|
| Purchase Price | $82,000 | Slam dunk! We also got $2,000 back at closing so Total price is $80k |
| Down payment 20% used portfolio loan at local bank | $16,400 | 20% down on a portfolio loan at %5.125 |
| Closing costs | $1,742 | Closing cost -after all pro-rations and deposit transfer and seller contribution |
| Total cost of deal | $18,142 | |
| Anticipated Rent | $1100 | |
| Monthly Mortgage | $441 | 20 year portfolio loan at %5.125 |
| Anticipated monthly Expense | $150 | Average of $1800 a year in expenses |
| Monthly property taxes and insurance | $250 | |
| Monthly cash flow | $259 | Respectable |
| Rent to Purchase price Ratio | 1.37% | Solid stand up double, (maybe a sliding triple) |
Net Worth Update
