So this is out first rental!. We bought it on 08/2017 and we were not 100% what we were doing but we were sure we wanted to start our path in real estate investments.
Our plan was to “buy and hold” and we did some cosmetic repairs. After we finished the repairs we rented it out and monthly cash flow started right away. We realized we had invested around $30k (down payment + closing costs + repairs) and getting a low percentage of cash-on-cash return. Did not sound like a perfect deal or even a good one, but that made us ask ourselves “is this really how people invest in rental properties?”, answer definitely was NO!.
This situation made us to research more about the different strategies that exist in the real estate game, we knew there had to be something that we were missing and we wanted to know WHAT.
- Ceramic tile on 2 bedrooms and bathroom.
- Full bathroom renovation (light fixtures, vanity, toilet, walls)
- Painted interior
- New fans (bedrooms and living room)
- Painted kitchen cabinets
- Replaced kitchen countertop
- Full clean out of the backyard
8% cash-on-cash return!
As you can see, cash-on-cash return is low compared of what more experienced investors look for their investment. We later knew that 12%-16% are the numbers most of the investors go for.
The good thing about this property is that is going up in value each year, as of now we calculate a $130k-$135k value, that means we would be doing a refinance in a couple of years and reinvest those funds in more properties.
We are managing ourselves the property, so there is no management fee that lowers our monthly cash flow. Property has not had any big issues, but of course we have received calls every now and then about little repairs that we take care of right away. This has given us a taste of what is to manage rental properties (not fun at all).
Big lesson here is that even we were not sure what strategy was the best for us, we took a chance and jump into this real estate game. This might not be our best investment but it definitely gave us a LOT of experience and we don’t regret at all!.