Rentals to Wealth EP 2: Running the Numbers on Our New Investment Property
In the second episode of Rental to Wealth, Kyle and I dive deep into the details of our recent purchase and share with you all the numbers. With also give you an interior tour of the third unit and discuss the renovation plans and how we plan to maximize rent.
The Details
Big Green is a historic triplex in South Jersey that boats 2,225 sqft of living space divided into three units. The property also includes a basement with laundry access, sizable yard, and five garage bays. We closed on the property with two of the three units rented which is perfect for us house hackers.
The Numbers
Acquisition Costs
- Purchase Price – $330,000 with $10,000 back from sellers towards closing costs
- Down Payment – $11,550 (3.5% FHA Loan)
- Interest Rate – 3.375% 30 year fixed
Current Rents
- Unit 1 – Currently rented for $1,100
- Unit 2 – Currently rented for $1,000
- Unit 3 – Vacant
- Five Garage Bays – Vacant
Renovation Plans and Budget
While Big Green has great bones, it’s completely dated and needs a nice face lift. Our renovation budget is $65,000 and includes:
- New floors, kitchens and baths in all units
- Extricated old knob and tube and rewiring the house
- Updated electrical panel boxes
- Minor plumbing
- Installing forced heat and central air in unit 3
- Enlarging the driveway
After Repair Market Rents
Once we renovate and turnover the units, we’ll be able to command much higher rents.
- Unit 1 – After Repair Rent $1,450
- Unit 2 – After Repair Rent $1,425
- Unit 3 – After Repair Rent $1,150
- Five Garage Bays -$750
- Total Gross Rents – $4,775
Cash Flow
Let’s get to the part we all care about. How much money are we making? After full renovation and turnovers below is our deal analysis.
- Principle and Interest – $1,415
- PMI – $224
- Insurance – $120
- Taxes – $916
Total Fixed Expenses $2,675
- Plus 21% for reserves – $1,002.75
- Plus 7% for Property Management – $334.25
Total monthly expenses – $4,012
Total monthly after repair rents ($4,775) minus total expenses ($4,012) equals $762.18 in monthly cash flows which gives us a 12% CoC return.
Up Next
In the third episode, we finally get our hands on this place and start demoing the bathroom in unit 3.
DIY on, we’ll see you in the next one!
