Welcome to my latest income property-a 3 bedroom 1.5 bathroom cement block single family residence in Jacksonville, FL.
Alexon was purchased through a wholesaler in the area. I was given 6 hours to decide if I wanted it, not a lot of time! Luckily for me I was able to get in touch with all the right people and get it under contract quickly.
At the time I bought it, the property was vacant and needed minor repairs. The majority of the work was needed to repair the roof and replace the area underneath the overhang of the roof where the wood had rotted. In addition to these repairs, I also had the property repainted, kitchen floor replaced, cabinets repainted, new doors installed, plumbing repaired, electrical upgraded, garage repaired, bathrooms refinished, new appliances and fridge installed, and some repairs made to the handrail leading into the home from the back yard. (Pictures shown were taken before work was done)
This property was purchased for the incredible price of $45,000. The total cost of the work to bring it rent ready was $6,500. This left me with an all-in price of $51,500.
The house sat on the market for a little under a month before a tenant was found. The house is being rented for $975 a month.
Crunching The Numbers
A run down of the expenses of the property produced the following information:
Property Taxes= $85
Management Fees= $88
Total = $575
At current rental rates ($975), this gives me an expected monthly cash flow of $400 a month
The property were purchased all cash, 30 day close, 10 day inspection period, with a $1000 earnest money deposit. These are very strong terms and contributed to an easier transaction for the seller and wholesaler and a better price for me.
The house was appraised once rehab work was completed for an incredible $91,000. My lender allowed me to pull out 75% of that, giving me a loan for $68,000. This meant I was able to pull out more money than I put in, and still end up with a cash flow of approximately $400 a month. Major score. It is important to note that not only does the property cash flow, it also came with significant equity built in and a very short turnaround time.
My property manager was a big fan of the area and so far she has turned out to be dead on. The property rented quickly and for a good price. I had intended to have the hardwood floors refinished, but the tenant requested they be left as is as they were ready to move in.
What I Learned On This Deal
Your reputation is everything! I was able to get such a great price on this house, possibly the best deal I’ve done out of state EVER, because the wholesaler wanted to secure my future business. If you want to get the best deals, think about what you can offer, not just what you want.
- Florida requires surveys to be done before a loan can be given. The survey was ordered at the same time as the appraisal.
- The property tax was higher than I expected due to the house being worth significantly more than I paid.
- The northern Florida housing market is very hot right now and the appraisers are all very busy. This caused me to have to wait one month longer than I planned to get my money back out and there was nothing I could do about it.
- The single family homes in this area rent significantly faster than the townhomes that are more reasonably priced.
- Replicating a system in much easier than developing a new one! I used the same contractor for the work as I did on my last two and he was able to finish very quickly.
- My home inspector was able to schedule me a quick inspection and gave me a call immediately after he was done to let me know there were no major defects. Even though he is a good inspector, he still missed a rag in the plumbing for the washer and dryer that cost me $250 to have rectified by a plumber. Always expect the unexpected!
- This deal was one I was initially hesitant on and it would have been foolish for me to pass it up. When your counselors tell you it’s a good deal, don’t hesitate to act.
- Building systems is crucial. Keep working at teaching the people you hire what you want, and how you want it to look. I had to have the cabinets repainted twice when the first attempt was less than satisfactory.
- USE your property management company. In addition to catching the cabinet issue, they also noticed the wrong material was used in the kitchen floor. Having a second set of eyes is crucial in out-of-state investing.
- Economies of scale-By purchasing three properties in the same neighborhood, I was able to save myself the time of checking out/scouting three different neighborhoods. I plan to continue buying here as long as I’m able.
- Crunch the numbers of your investment to make sure it makes financial sense to buy, but know the strengths and weaknesses of your investment. This property cash flows, but even if the cash flow wasn’t strong, I still would have purchased it. This property came with a huge amount of equity, and equity is what builds real wealth.
- Get inspections on anything you’re purchasing. Even with the inspection, some stuff was still missed. Make sure you always plan for contingencies as no one can catch everything.
- Single family homes rent faster than less desirable townhomes or condos.
- Don’t ignore roofing issues because they aren’t sexy to fix. A roof is one of the core foundations of your property and if it goes bad, your whole investment will go bad.
- Get the most value for your money by letting the experts do what they are experts at. Rely on your property management for more than just collecting the rent.
- If you can buy a property that makes sense at the current rent, good. If there is room to drive rents higher, even better. Always look for the value-add component to create wealth. Prepare for worst case scenario but plan for best case scenario.
- Cross reference your information over several mediums. For rent use:
- 1. Property Managers
- 2. www.rentometer.com
- 3. www.Craigslist.com.
- For price comps use:
- 1. Realtors in the area
- 2. Online sites like Zillow.
- 3. My KW app to see what nearby homes are selling for (email me to get a free copy if you don’t have one).
- Look for ways to buy equity, not just cash flow.
- Get several bids for any construction work and offer multiple jobs to the crew if possible. You can get a better deal on the work if you can give them a higher volume of work.
- Have someone check ALL the work your contractor does to ensure it’s done right. You don’t want to be calling them out once the home is occupied by a tenant. That gets way more difficult.