Last week, I released The Real Estate Investor Web Series, a reality-style show that follows my business partner Shauwn and I as we acquire rental real estate. The episode focused on the Glendora Deal, a nice little bread and butter rental property in San Antonio.
People loved the video, but they wanted to see more details… I’ll list as many as I can below, but I won’t remember them all; so please comment with more questions.
House Specs
Glendora is a 3 Bedroom, 1 bath rental property just west of I-35 in San Antonio. We located the deal through one of our realtors.
We liked the neighborhood because it was close to where we work (you can see it from our the window of our 6th floor office); and it is centrally located next to some major job-generating developments.
Rents were strong enough in the neighborhood to support cash flow for our company as well as payments to our private lender.
Acquisition Costs
We got this property way below market because of the speed at which we were able to act. Buying it for $35,500 when it is worth $68k+ in good condition protects us in a lot of ways.
The rehab is already done and cost us $12,000 to complete. The phone has been ringing off the hook from tenants wanting to live there, so I’m sure our rental guy already has it rented out.
$35,500 – Purchase Price
+$12,000 – Rehab
+$ 1,000 – Closing Costs
=$48,900 – All In
Equity
This nice little house instantly created about $20,000 in equity for our company and our investors. One of the really great things about buying real estate correctly is that it changes your net worth from day 1.
A year from now, we will sell the house to capture the equity and roll it into the next deal. We expect to pay about 7% in realtor and title fees, so that will bring the profit to around $14k.
Equity Capture
$68,250 – After Repair Value
-$48,900 – All In
=$19,350 – Equity Capture
-$4,777 – Realtor & Title
=14,572 – Projected Profit
Cash Flow
Cashflow is the #1 reason we chose real estate because it is passive income. Equity is the goose and cash flow is the golden egg. Never touch the goose and grow your golden eggs to cover your monthly expenses.
Monthly Cash Flow
$750 – Rent
$412 – Expenses
$338/mo. – Cash Flow
I’m sure you all have more questions, so please.. let ‘em rip!
{ 9 comments… read them below or add one }
Rehab went off without a hitch. You may not know that Shauwn has done hundreds of rehabs, so that cuts down on surprises.
We use hard money lenders. They typically finance up to 70% of the after repair value… so in this case, we had nothing out of pocket.
Thanks for taking the time to go back and post all this information. That really completes the story. Were there any surprises in the rehab you did? Things you were not expecting?
Love it!!! Thanks for throwing out the details. How are you guys managing to finance your properties? Traditional financing, owner financing, buying right out? That seems to be the main obstacle for me when an opportunity presents itself. Would love to get some insights. Thanks.
We have several applications and will have it rented by this weekend. We sign 1 year leases and sell the property in the 13th month, so turnover is not an issue.
Wow, nice profit. Is the house rented out now? Do you have a high turn around on renters?
Great article. My wife and I just bought/fixed/rented our first single family home and we are super excited to do the next one.
Was this a hard money deal? I noticed that the loan was around 52% LTV.
I also noticed that this house wasn’t exactly ‘bread and butter’ as LU inc defines it. Care to give me some advice on straying off the path?
Congrats on getting your 1st house done! Getting the 1st one done is always the hardest and then it’s gravy after that.
What city are you in?
I would consider this house “bread and butter” for San Antonio, even though it is slightly different from the LU model. The only difference is that it’s a 3/1/0 instead of a 3/2/2. In San Antonio, it’s very common to have no garage or a converted garage.
We shoot for ARV’s in the range of $80-$120k and this is on the lower end of that spectrum, but it still fits.
The most important factors to consider in “Bread and Butter” are 1. It has to cashflow, and 2. it has to have equity.
Also, it needs to be the kind of house that will rent quickly and this one is.
Thanks! I keep telling people that locating and getting it under contract was the hardest part. My parents asked me what I did to buy it and I told them all I did was make phone calls and sign contracts!
We live in Carrollton (outside of Dallas) so we go to the Irving office.
Very interesting deal, Bryan. I’ve seen lots of 3/1/1′s around here but I have a tendency to stay away from them for fear of 1) getting less attention and 2) being harder to sell on the back end. Your ARV range was also what we are shooting for but im starting to think that going even lower like this deal might be better since it would take less out of pocket.
I’m already super excited to do the next one even though we are just turning over the keys to our tenant today!