DONE! Rental Property #5 completed closing today after I signed the docs and wired out the money. Now, we play the waiting game, and hopefully can secure full month’s rent starting next month, in March. Closing this property puts me one step closer to the endgame. I can’t wait until this property starts generating cash flow b/c it should be a cash cow!
The 1st floor unit passed Chicago Housing Authority (CHA) inspection recently, and rent determination came back at $1208/month. It is a four bedroom, 1 bathroom unit. The 2nd floor unit should also rent for the same amount, since it is also a 4/1.
Here are the estimated returns, when factoring in 20% for reserves (10% for vacancy and 10% for maintenance, or 5% for vacancy and 15% for maintenance, etc., depending on how you want to calculate it):
Note: Spreadsheets below do NOT factor in closing costs, which I probably should have included to calculate true ROI… It’s still a good representation, though, and I’m definitely not the type of person who gets THAT caught up with numbers. I just need something close… I’m not going to lose any sleep because my cash-on-cash returns are actually 1% lower in reality…
Since this property is fully redeveloped (turnkey), it really shouldn’t need much maintenance in the first few years. We’ll play it safe, though, and budget 10% in each month.
Everyone runs numbers differently, and you just have to do what works best for YOU. For myself, if I can get ~10% cash-on-cash returns after setting aside 20% for reserves (vacancy and maintenance), I’m more than happy with that. I’m not an All-Star investor, and honestly, I don’t really feel like I need to be one in order to succeed.
Cash flow is the name of the game! So, being able to generate over $500/month net would be just fine with me…
Here’s what the raw numbers (best possible case scenario for a given month) would look like without allocating for reserves:
And of course, after closing, I made sure to go out and celebrate! This is somewhat of a tradition I’ve been practicing since closing Rental Property #1… I ALWAYS make sure to reward myself for closing a deal. Gotta live it up a little and enjoy all your hard work, right? 🙂
I don’t eat at expensive steakhouses, but sometimes, like tonight, I do indeed get steak (prime rib):
And that concludes the journey of closing Rental Property #5. I’ll probably take a small hiatus for awhile and work on building back up the cash reserves. After that, we should be on schedule to get another property towards the end of this year. Next stop, Rental Property #6! Let’s go and make it happen!!!