Real Estate Rental Property SH #2 Update – Under Contract for Sale (April 09, 2017)

by FI Fighter on April 10, 2017

in Real Estate Updates

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Well, it’s been a pretty sweet 2-3 year run for my side hustle properties, so I guess now is as good a time as any to hit the SELL button! As readers of this blog know damn well, I just try my best to be an agnostic investor, never falling in love with any particular investment, or asset class.

It’s also no secret to anyone that real estate is HOT right now, and has been getting bid up for the last, oh, let’s say 5-6 years.

Buy low and sell high.

Sounds boring, but I’m ALWAYS going to believe in that and do my best to stay grounded…

How does the saying go?

A bull market can make ANY geek off the street feel like an investing genius and the next Warren Buffett.

Yeah, I’d like to believe I’m a lot more humble than that…

With all that said, my investing partners and I just recently entered into a contract agreement to sell Rental Property SH #2. We agreed to part ways with the rental property for a sales price of $670,000. We originally won the unit in late 2014 for $521,000.

Here were the original Day 1 numbers for Rental Property SH #2.

bay_area_sh2_numbers

As you can see above, this rental property has been cash flow positive since Day 1 (yes, almost unheard of these days in the Bay Area using conventional 20-25% downpayment)! Further, we’ve had excellent tenants since the beginning, and our cash flow has only increased through the years as rents have climbed up steadily.

In other words — You seldom ever go wrong chasing after Class A rental properties (at attractive prices) in wonderful locations!

I really don’t care what anyone else out there says… I’ve dabbled around and experimented with: cheap real estate, expensive real estate, Class A, B, C properties, etc…

My own experiences have convinced me without a shadow of a doubt that if you want to win the real estate game in the long run (we’re talking Buy and Hold Forever here), you want to err on the side of: QUALITY, QUALITY, QUALITY!

Rental Property SH #2 has QUALITY in spades! We have had only very minor maintenance issues (probably less than $100 in total spent by us since we’ve owned the unit) and ZERO vacancy!

So, why on earth are we selling?

When it comes down to it, it’s because this was a partnership deal… and selling now makes for a very sensible exit point (if I look at things objectively, I just can’t see the odds being very high that this property climbs up another $50k, $100k, etc) anytime soon… Perhaps, the next real estate cycle… but this current one is pretty long in the tooth, if you ask me…

We are CLEARLY in/near FROTH territory with real estate in the Bay Area!

Still, honestly, if I owned this awesome piece of property under just my own name, I would never sell it… The house is too good, and the location is even better… It’s the perfect candidate for Buy and Hold Forever.

But it is what it is…

And when all is said and done, we should be able to walk away with total returns (capital gains + cash flow) of ~90-100%.

For a novice investor like myself, anytime you can come close to the vicinity of securing realized gains of anywhere near 100%, that’s NEVER a bad thing!

I don’t ever want to be the guy who is so delusional that they complain about such robust gains… As an investor/speculator, I’m not that good, so I ain’t gonna lie and pretend that I am… I know a nice return when I see one, and this is it, so no looking back and no regrets!!

Yeah, so now it’s off to the races in trying to get this thing closed by mid May! Hopefully, I’ll soon have another ~$60,000 of cash available for the next major investment opportunity!

 

~90-100% total returns in less than 3 years…

 

That’s plenty good enough for me!

 

It’s been fun, and one very lucrative ride fellas! Cheers to a job well done!

 

Till next time…

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{ 3 comments… read them below or add one }

1 SriniNo Gravatar April 11, 2017 at 6:30 am

Good Luck Jay, My sale is getting closed in the next 2 days.

I am enjoying my early days of FI without a day job.

Cheers

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2 JoeNo Gravatar April 11, 2017 at 9:24 am

Is your tax situation going to eat up a lot of your profits? Any plans for 1031?

Difficult for me to sell any appreciated assets anymore, since I’d lose half the gains to taxes. Just pass it on to the next generation with stepped up basis (to squander? Haha)

Reply

3 Brian - Rental MindsetNo Gravatar April 11, 2017 at 8:21 pm

That’s great! Entering into a partnership is great to open up the options and diversify more, but the long-run is tough. Like Joe above – I’d be curious to hear if a 1031 is possible with the partner.

Those are incredible numbers for Santa Clara, a quick $150k!

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