Rental Property Deals That Will Support You For Life – Video 18
Not all rental properties are created equal. I’m going to show you which ones to buy and the types of markets to buy them in.
Here is a strategy that allows you to buy your portfolio and never think about it again except when you look at your bank account each month and watch your balance increase.
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Read Transcript for “Rental Property Deals That Will Support You For Life”
These are the types of investment properties I’m personally selling that I think will make sense for you. Let me show you an example of one to help you understand what you can get and why it makes so much sense.
Joe: If you have cash to investment, here’s an investment that might make sense for you. And, you can buy one or buy three or you can buy a dozen of them from me. I can do any of those things for you.
Joe: The goal here is not to sell this specific property (because it’s probably going to be sold by the time you see this video) but to understand what you can get and why it makes sense, so let me show you some pictures and some of the numbers. Let’s go to the screen capture video.
Joe: This is a picture of a property that I bought through an estate sale. It was in pretty good shape when I bought it. I didn’t have to spend a whole lot of money on it. But I had about $29,900 into it with all of my carrying costs, the purchase price, the closing costs and everything else that I had into it, then I added $10,000 onto it, and then I sold it to an investor. Now, this is the same kind of property that I would sell to you as well, if you were interested. Certainly, it made a lot more sense for me, because I found it, put it together and got a tenant in there. I had the resources and the manager to find this.
Joe: The process of finding this takes some skill and knowledge. Everybody can learn it, but I happen to have it already. The guy that wanted to buy it from me didn’t want to put the time in and still wanted to get a good return on his money. I would have had a higher return than him if I would have kept the property. I would have kept the property if I didn’t find a buyer and been happy with the return because this was a property that was bought with money out of my Roth IRA, which means I’m going to be able to keep these properties long term or take a profit on them and then turn around and buy more properties, and then do it again.
Joe: We sold to the investor for $39,900. It had comps on it in the area for $65,000 to $75,000, so it was a good deal for him. It was certainly an even better deal for me when I bought it. When he bought it, we had a tenant in place and that person was paying $800 a month which comes out to $9,600 gross annual income per year. The taxes on it were currently $584 annually. The insurance was about $594 annually and the property management was 10% of the income which was $9,600$ per month, so the annual profit on this was $7,462. Now if you divide $7,462 by the purchase price of $39,900, you get 18.7% return annually on your property.
Joe: There are very few places that you can go to get this kind or return. Now, keep in mind that doesn’t include future repairs; maybe a furnace goes out and you have to replace that, maybe you have to put a new roof on it, although you can see form this picture that the roof is in great condition on this. It has aluminum siding so it’s going to be in good shape for quite a few years. It had good windows on the property. It’s just a good property. I’ll show you more picture of it in a second. This type of deal makes a lot of sense.
Joe: This investor had to come up with cash to do it. He came up with money that he pulled out of his home equity line. His home equity line was costing him about 5% a year, so he’s going to be making about 13% on this. Keep in mind as well, since you’re going to have repairs and vacancies in the future, I would figure 1% to 4% of this cash on cash return to go towards that. In fact, he’s going to have anywhere from probably around 14% to 18.7% as his real return on investment on this property. That doesn’t include if he sells the property, although this isn’t a property that you turn around and sell right now – you’re not going to turn around and sell this for $65,000 or $75,000 in all likelihood.
Joe: These comps were before the market took a hit. The market took a hit, or at least the comps took a hit because of all of the foreclosures in the neighborhood – all of these neighborhoods took this hit.
Joe: This is a good, solid, blue collared neighborhood. It’s not a warzone. It’s actually just two blocks away from $200,000 houses just north of it (which would be just to the left of it on this picture). So, this is a good property, a good return, and this fellow bought four different properties at the same time when he closed them, so he’s going to get a really nice solid return on his investment; his risk is going to be spread out.
Joe: The beauty here is that he buys it very, very cheap. If you bought for $75,000-$95,000 and got an $800 per month return (which is what we used to see) it’s now possible to buy them so much cheaper because of what happened in the market. So, we’re in a very short period of time right now, it may last a year, it may last 2 or 3 years, where we’re still able to find these properties and able to get these kinds of deals.
Joe: Another thing I might warn you about is – don’t go and buy properties (because you may find one like this) for $10,000 or $15,000 in the MLS or in the newspaper, etc. for sale that are not going to be habitable, then if you’re going to rehab the property and you spend $20,000 to rehab it and $10,000-$20,000 to buy it, it’s not going to be a very good deal for you. If you don’t know the people who are doing the rehab, or if you don’t know the property manager, there’s a lot of risk of whether or not they’re going to fix it up.
Joe: All of those things – take that into account when you look at the comps and you say, ‘Oh, I can get a property like this for $15,000.’ If you start looking around for these properties and go to these locations and look at them, you’ll find out that that’s not necessarily possible. Even we paid more for them than that. So keep that in mind as you go.
Joe: Before I go back, let me just show you some of the other pictures on the interior. The pictures above were taken before we did the work, although actually this one is after the work because it’s got the new flooring in it – and this is some kind of Pergo or laminate flooring – that’s not real wood down there. That’s about the same price as carpet. We’ve been having so many problems with our tenants screwing up our carpet that we thought, ‘Let’s put this stuff in and see if it lasts longer,’ and so far we’ve had pretty good luck with it, And it looks great, they love it and it helps get it rented faster.
Joe: We believe that if you have a property that looks nice, and you take care of it, you’re going to get a better class of tenants. We don’t like to be slumlords because that’s the type of tenant that you get. So have a good property – have something that you wouldn’t mind living in yourself and you wouldn’t mind having your kids in the neighborhood of – that’s the way we’re looking at these in order to make them work. These are good deals.
Joe: That’s the deal. Those are the types of things that we have if you’re interested. There’s another video that you might want to watch. It’s at GetMoreClients.com/highcashflowhouses. Just go to this web address and you can watch a video and buy properties from us that we have in our inventory already. Or, we can actually find you properties, which we do with this system as well, that will make sense.