Real Estate Rental Property Update (August 02, 2012)

by FI Fighter on August 2, 2012

in Real Estate Updates

In June, I mentioned that the real estate property I was looking at was back on the market after financing fell through for the initial buyer. In the last post, I mentioned that my real estate agent approached me and wanted to know if I wanted to continue and pursue this property. That night, I decided to go “all in”, and submitted a bid that was 7k lower than the winning bid. As it turns out, my offer was accepted!

That’s right, I’ve been under contract the past 30 days trying to close out this deal. After going through inspection, appraisal, and finally getting the loan (the part that took the longest), I officially became a homeowner today! Now that escrow has closed and I’ve received the keys, the real fun begins!

I’ve done a rough analysis, and figure that I can make more money renting out the entire property (as opposed to living there and renting out the other rooms). Besides, my commute would also increase, so I’ve decided to stay put. In the meantime, I’m hoping to rent out the place for ~ 2k a month. After factoring in mortgage, property taxes, insurance, property manager, etc., I’m looking to net $400 to $500 a month. This will bring inΒ $4800 to $6000 a year (not factoring any unforeseen expenses). On the low end, this would amount to ~5.6% yield on the initial down payment.

If anything, I will be receiving positive cash flow to help me pay off my own monthly rent. In addition, I will also be able to pay down the interest and principal on a property that I will someday own outright.

 

 

{ 4 comments… read them below or add one }

1 Robert August 3, 2012 at 6:38 am

Congratulations! I’m am just starting on my road to financial independence and think real estate passive income is a path I want to take. I wish you all the best and will be following your blog.

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2 FI Fighter August 3, 2012 at 9:13 pm

Robert,

Thanks for the comment, I appreciate the kind words! I also think that real estate investing is a good move towards building a passive / semi-passive income stream. At this point, I’m trying to diversify my investments in both real estate and stocks. Since this is my first property, I can’t say with any conviction which one is “better”. So, I’ll be tracking my progress and results for both investments. Time will tell… in a perfect world, both methods will be successful.

Best of luck to you on your road to FI!

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3 Compounding Income August 4, 2012 at 3:05 am

Woah that’s awesome! You’ll be able to generate a monthly proft, increase rents over time, and build equity. Sounds like a winning combination.

I’m sure you’ll learn a lot in the process. I bet the next property will be easier for you. Good stuff!

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4 FI Fighter August 12, 2012 at 9:31 pm

CI,

Thanks for the encouragement! Yep, that is the plan! I am hoping that saving up for the next property won’t take as long as the first. I am sort of hoping for a snowball effect when it comes to purchasing properties. The first one took me ~5 years to save for.

Over time, rents should increase, and the equity in the house continues to build. Since I am already cash-flow positive from the onset of Year 1, this is encouraging… Yes, I’m sure there is a ton to learn, so I will definitely keep updating on the blog so that others can learn from my mistakes πŸ™‚

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