Rental Property SH #1 is still undergoing rehab and it looks like we aren’t going to make our schedule of securing a tenant by October 01. As it turns out, we didn’t purchase enough laminate and had to rush order a few more boxes… sigh. This delay is probably going to push out completion of the renovation until the middle of next week… Although we will still attempt to do showings from now until then, sadly, it seems like most prospective tenants don’t want to sign a lease unless the property is in COMPLETE rent-ready condition.
C’mon folks, the laminate is 80% installed… Please use your imagination and fill in the blanks on what the finished product will look like! 😉
Sadly, no.
But that’s just the way it goes when you’re trying to land top-dollar rent… The tenant pool we are choosing from is cash rich, so these folks have every right to be extra picky. There’s also a ton of competition out there as well, which doesn’t help our cause.
So, live and learn. Next time around, I’ll make sure to have the property fully turnkey ready before hosting any open houses. The unit has to POP so that we can HOOK a tenant and make a lasting impression that sticks for good in their mind.
In other news, Rental Property SH #2 (which actually IS in turnkey condition), secured a 1 year lease today! That’s right, our second property (which just closed last week) will be out the gates running before SH #1, which closed in August. Our first mortgage payment for SH #2 isn’t due until November 01, but we will have the place rented out beginning October 01. SWEET!
Rent is set at $3,100/month for 1 year.
Here are what the cash flow numbers are projected to look like (minus reserves) for SH #2:
The low 3.75% interest rate is due to the 7/1 ARM we have on this property. Again, these Bay Area side hustle deals are purely appreciation plays into the future. Any cash flow we generate in the short-term is just icing on the cake! 🙂
Hey, 5% cap rate in the Bay area is nothing to sneeze at!
And if I remember correctly, that’s $100 more than you were targeting per month? Did you get a bidding war?
Mr. Frugalwoods,
Yup, we aimed a little higher on this one and luckily found a taker at $3100/month… This just goes to show how insane rent appreciation has been in the Bay these last few years…
Going into this deal, I would have guessed that $2800/month was about market rate for a 3/2.
The extra rent definitely helps make the numbers work better in the short-term…
Cheers!
Great job on this one, but I am always leery of properties that do not cash flow. This one should do OK for now, and must appreciate at least 7% just to break even to cover selling commissions.
Hopefully you can keep low maintenance tenants there, and taxes do not go up too much.
Eric, Thanks! Yes, this property doesn’t really cash flow, but unfortunately, that’s pretty standard here in the Bay… Going into multi-families might help that slightly but the numbers will still pale when compared to what you’re getting in your market. So, my preference for local investing is to primarily focus on rent/price appreciation and emphasize buying into Class A properties that allow me the capability to rent out to top-tier tenants. I’ll take quality tenants and give up some of that cash flow… Vacancy should be very low, and maintenance, hopefully as well since the property is just about turnkey… Read more »
Pretty cool! Glad you were able to secure a tenant so quickly and get at least one of the two rented out. Hopefully it won’t be too long for the first property.
It looks all to me like a mysterious land which I fail to grasp. So all I can say is congrats and hope everything will go well and smooth with SH1. Good luck with it.
You seem to be like a fish in the water. Glad it all works well for you and looking for your next monthly reviews.
I meant to say “looking forward”
Nice news! Allways a pleasure to read your posts and see your success.
I’m learning so much reading through your blog, and inspired to invest in real estate when I save up for a down payment on an investment property. Do you only invest in single and two family homes?
I can understand wanting a finished product for $$$, I would do the same thing unless I absolutely loved it, but I probably still wouldn’t sign on the dotted line unless it had certain provisions or a discount.