Rental Property #5 Update (February 19, 2013)


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):

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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!!!

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6 years ago

Woo, congrats FI! Real estate prices are sure different in other places…

JC @ Passive-Income-Pursuit

Congrats on closing #5! I know it’s been a long time coming but at least it’s over and done with and should starting contributing to your bottom line soon.

6 years ago

Way to go – congrats! Rental Property #5 puts you pretty close to your forward-looking PI goals, no?

6 years ago

Congrats on the property. Keep building reserves. As you get more units, individual turns are cash flowed and paid by the other units with tenants, but that also means less cash flow to the bottom line. Watch the property manager, they make the most money, when you make the least.

Quality tenants in a quality building is where the money is at, and also low quality tenants in a low quality apartment. But you have to run each one totally different.

6 years ago

Congratulations! Time to regroup for sure! Have you decided on whether or not you are going to present net cash flows inclusive of some level of reserves? Perhaps pool your total cash flow and take 10-15% right off the top as reserves (treat like an actual business expense). Should give a better idea of what your true monthly cash flow will be in aggregate. Plus it won’t hurt to “forever” stock away that 10-15% combined into an account specifically for any vacancy/maintenance issue and not have to touch your monthly cash flow statement.

6 years ago
Reply to  FI Fighter

Makes sense. Certainly a net income statement is different from a cash flow statement. Just thinking about roofs, appliances, and other capital expenditures that don’t come frequently, but certainly have a large impact!

6 years ago

Congrats on the new rental!!!

Dave @ The New York Budget

Congrats! And that dinner looks phenomenal!

The First Million is the Hardest

Congrats! It’s seriously impressive how quickly you’re accumulating these properties!

6 years ago

Today I forgive you Fighter. I just had a diner so, your pictures didn’t make me drooling this time.

Well, big CONGRATS on your #5 !!!!!!

I started being quite successful with options trading and combined with dividends I will be able to retire in 5 years with less principal. Now I have to work for it hard, but in 5 years I should be able to stop the rat race. Hopefully.

So it is nice to see you getting closer to your dream without being a bit envy 🙂

6 years ago

Hello FI, I was wondering if you could share the turnkey companies you have successfully worked with in the cities you own properties. I have been looking online and it is hard to distinguish the serious ones from the scammers 🙁


[…] So, when in doubt, don’t purchase any rental properties that do not cash flow from Day 1! I haven’t purchased a rental property in a few months, but here is the cash flow analysis I used for Rental Property #5: […]


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