Real Estate Rental Property SH #1 Update (September 22, 2016)

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Well, it’s been ages since I last posted an update regarding my rental properties… Truth of the matter is, I just totally hate real estate right now and really see no point in talking about it. For the most part, I’m completely tuned out to the real estate markets, and am simply playing the role of landlord rent collector each and every month.

You know, passive income (cash flow)!

The seemingly only metric that even matters to most investors out there… Sigh…

But anyway, when we are encroaching near market tops, I don’t care one iota for Shiny Object Syndrome

Shout out to Lane for sharing the following graphic with me!

real-estate-tops

Just my own intuition speaking, but I feel like the Bay Area is in Phase 4 right now… If anyone wants to try and pick up some of that scrap cash flow, be my guest…

As for myself, I’m trying to get out of dodge (partially)… When the ducks are quacking, know when to feed them!

With that said, earlier this morning, my investment partners (4-way partnership) and I closed escrow and completed our sale of Rental Property SH #1 for $620,000! We originally closed escrow on the rental property in August 2014 for $490,000.

So, we made $130,000 in gross appreciation (capital gains) in just over 2 years time…

Not bad…

It seems like ages ago when we first won the deal… When all was said and done…

 

Purchase Price: $490,000
Sales Price: $620,000
Downpayment (20%): $98,000
My Downpayment (1/4): $24,500
My Proceeds (1/4): $46,932

 

Roughly about ~91% ROI.

 

Please note: Any cash flow and refi proceeds made throughout the 2 year time period were used to get the unit up to stuff for sale (and account for initial closing costs)… The ROI shown above isn’t an exact figure, per se, but it’s a reasonable approximation…

 

Rental Property SH #1 History

 

Oh, the good old days of buying real estate…

For anyone who is new to this blog, once upon a time, I was really big on rental properties… But then prices went ballistic in my local market, and in 2015, I lost all interest…

Most recently, this past summer, my investment partners and I had discussions about exiting out of one of our partnership deals… The markets still seemed frothy and it just felt like the right time to sell.

A few short months later, and here we are today, completing the transaction on September 22. With the deal now officially in the books (and money deposited into my account), we can close out this chapter.

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As I previously shared with readers earlier this month, I had every intention of raising some more capital as we head into the fall/election season. With this wire hitting my account, I should have within striking distance of $200k in cash and cash equivalents to fire away (whenever the next “buying opportunity of a lifetime” presents itself)…

I’m a patient guy…

I’ll wait things out until I get an absolutely brutal bear market to operate in…

  • General equities (e.g. S&P 500, FAANG, biotech, etc.) in 2009
  • High quality real estate (e.g. Bay Area, Seattle, Austin, Boston, etc.) in 2012
  • Precious Metals mining stocks in 2015

Each of those scenarios above have produced triple digit returns for investors…

And I don’t care what asset class the next opportunity happens to be found in… I don’t discriminate… When I sense the Depths of Despair taking hold of a sector, I start to tune in most attentively.

Right now, the only sector that I feel is truly hated by almost everyone is uranium… Perhaps it’s too premature to jump into the fray just this moment, but I am monitoring that sector very closely.

That’s just how I operate… Forget “dollar cost averaging” into mediocre investments… I’m going to bide my time until I can “time the market” and extract more juice out of it then I’ll know what to do with… And I know many of you readers take that same approach towards investing as well!

But for old times’ sake, let’s reminisce one time!

Initial Assumptions From September 2014

Bay_Area_SH

The interest rate was actually lower on Day 1 than the initial assumption made above, as we got a decent 4.75% rate over 30 years fixed… Recently, we were able to refinance into 4.125%… Further, we actually never rented the unit out for $2,700/month… From Day 1, it was $2,850/month and our last lease expired at $3,000/month. We’ve been cash flow positive for awhile now… Market rents are now $3,200/month today…

But yeah, if the new buyers are planning on making this unit a rental, good freekin’ luck to you trying to get it to cash flow with a conventional downpayment at that sales price!

But that’s no longer my problem…

In the end, I booked my gains and couldn’t be any more pleased with how this partnership deal worked out.

For anyone keeping tabs, this investment group still owns another property together, Rental Property SH #2, which has up to now delivered more or less the same type of returns… Although in truth, Rental Property SH#2 is the better, more desirable unit that fetches both a higher resale value and market rent (and it has 2 full baths as opposed to 1.5). For now, we are holding it, but never say never, and who knows, maybe we’ll hit the sell button in the near future?

 

To the next round of deal(s)!

 

Fight On!

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LilithJoeREDDYFI FighterSrini Recent comment authors
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Tawcan
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Pretty good return. SF real estate market is pretty heated, makes sense to sell on top.

Dividend Hustler
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Awesome job Jay. Keep up the hustle bro. You’re killing it.
Here’s a cheer to this wonderful journey we are on. Everyday is a blessing.
Take care and dont’ stop!!

Roadmap2Retire
Guest

Thats an amazing ROI — 91% in 2 years!! Also love that chart shown above…very interesting to see where each city is.

Congrats on the closing! 🙂

R2R

joeybee
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joeybee

you don’t include commission on the sale?

Midwestern Landlord
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Midwestern Landlord

I agree Bay Area real estate is at crazy valuation levels. Good time to sell.

I guess we all have our own strategy that works for us and geographic location certainly plays a large role. In my area, real estate is still a great deal. The only thing that holds investors back is having the capital necessary to play the game. There will not be much appreciation, but there will be substantial cash flow returns with properties that are in very good locations. I like that formula as a long term hold investor / landlord.

It still seems a little bit odd to me that the stock market is so inefficient. You have shown that with your trades in the precious metal sector. Granted this sector was beaten down heavily before you started investing so a lot of investors lost money in the sector. One person loses and one person wins depending on the cycle. I just don’t really understand how values can fluctuate so dramatically when it defies logic in many cases. That is my real rub with the markets. I like investments to make sense. For astute investors like yourself, there is opportunity galore. I prefer investments that I can hold for the long term knowing that fundamentally they will be extremely sound financially.

Income Surfer
Guest

Congrats buddy. You’ve been wanting to unload a couple of those properties for a few months. Looking forward to your next travel post!
-Bryan

SFtrader
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SFtrader

They say cash is king for a reason. Amazing to me how many people focus on eking out gains in the S&P 500 during an over inflated equity market, rather than focusing on the preservation of capital. When the market finally does roll over, we may see a re-pricing of the uranium miners from “ridiculously cheap” to “fat pitch”.

Srini
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Srini

Hi Jay,

Congrats on closing the deal and taking profits back to your bank account.

I sold my apt unit last Nov and moved a third of the proceed to PM stocks ( in Hindsight worked out pretty well ) and hold remaining in cash.

My dad sold his house in which he lived for 35 yrs this May . A 10% portion of the proceed is waiting for the next crash to get in for 10 fold returns.
Cash is king. enjoy the smell of paper 🙂

cheers

REDDY
Guest
REDDY

Fifighter

what do you think about cash out refi instead of selling the property.
still gets cash out..
is it a good idea to do it if it still cash flows or one doesn’t mind having negative flow.

am in a scenario where i bought condo for $100k now its $200k, no loan
question is whether to sell, pay taxes, commission etc or refi and cash out 125k to 150k and hold on to the asset.

just wanted to see your expert opinion.
thx
Reddy

Lilith
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Lilith

How are your turnkey rentals out of state? Do you think they are good investments?

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