Time to do a full real estate investing strategy breakdown for each of my properties. I started giving a few teasers in my Highlights on instagram, but thought giving a more detailed breakdown on my real estate investing strategy is critical. I want to provide my real world experience with actual numbers for each of my real estate investment properties. I have a variety of real estate investment strategies ranging from house hacking to long term rent by the room to short term rental properties.
Time to dive into my rental properties in the order in which they were purchased!
When I Purchased The Property
I talk about stumbling into house hacking in my first ever podcast with @househackingsuccess and if you haven’t checked out the podcast yet, you can find it here! I was in the process of a big change in my normal day job. I had just been offered a promotion to move from the cold Bethlehem, PA down to warm and sunny Orlando, Fl. This was going to be an extremely big move for a few different reasons.
First, I was transitioning from an engineering role to an operations role. This was a massive change in potential career path with a lot more upside for income and personal growth.
Second, I would be moving to another state where I didn’t know anybody! Moving to an area where I don’t know anyone doesn’t really bother me too much. I did love the thought of moving to a warm part of the country again though!
Lastly, this was a big risk for me. I had never really taken big risks with my career and potential moving opportunities, but it was finally time to take a leap of faith.
I ended up moving from Bethlehem to Orlando in August of 2016. When doing my pre-move trips to Orlando I knew I didn’t want to rent from someone anymore. To me, renting is a quick way to just throw money down the drain that you never see again. One thing is important to point out though, renting isn’t a bad thing. I want to make sure that is clear. There is a time and place for renting versus buying. There are plenty of unexpected costs that come with buying real estate. Don’t let my context here fool you, I would rent in the future depending on my life situation.
Strategy For Property
So I was on the lookout for properties to purchase in Orlando on my moving trip. At this time, I had no intention of house hacking or even knew what house hacking was. What ended up happening with this property ended up being a blessing and has led me down the path I am on.
The OG’s original real estate investment strategy was house hacking. I didn’t run any of the numbers on this property when purchasing it. I just thought of what the mortgage was and said, “Ok, I guess that works.” I am by no means advocating this, but I literally had no idea what I didn’t know. I had never purchased a real estate investment property. Not only a real estate property, but also something I would be living in. For much more details on what house hacking is, click the link to here of the different strategies that can be used.
For The OG, I have added a few additional things to the House Hack. All bedrooms and common areas in the home are fully furnished. This was a very inexpensive way to add additional cost to the monthly rate for people who rent out the individual bedrooms. It is great for young professionals who are just getting their life together. For those reasons, I felt fully furnishing the home was a good idea.
Breakdown Of The Numbers
Time to break down the numbers!
Let’s first look at the purchase of the property.
I purchased this home for $292,000 on a conventional 5% down payment loan. Why conventional? Honestly, at the time I had no idea what I was doing and that allowed me to get my monthly payment around what I thought I could afford. When you live in the property you have the ability to do a Conventional loan with a down payment less than 20% of the properties purchase price. There are a lot of financing questions I am not overly familiar with. Real estate investment financing can get very creative and special. For these posts detailing out my properties, I am going to focus on what I did to finance and my thought process for going down that path.
For my expenses on The OG, here is the list:
- I pay for all utilities and internet each month. This is baked into to the rent price for each bedroom. Utilities roughly $200 per month and internet is $75.
- HOA Fee: $162 per month. This includes all lawn and other maintenance
- Expected CapEx: I will put away 10% for Capital Expenses (roof replacement, AC fixes, etc.) each month. This will end up being $300 per month.
- Occupancy Loss: $150 per month. This is the expected amount of lost income from rooms not being rented.
- Mortgage payment: $1,754 which includes PITI
All in, expenses will be around $2,641.
Now time for the income. Since this property is a rental by the bedroom, below are the numbers for what I charge for each bedroom:
- Bedroom #1: $800 per month
- Bedroom #2: $750 per month
- Bedroom #3: $650 per month
- Master Bedroom: $850 per month
Total income of $409 per month. For four “doors” and being overly conservative with some of the numbers, I will take this all day. I expect to keep occupancy even less than this and I also don’t expect any major CapEx soon as the home was brand new when I purchased it. For those reasons, I believe the cashflow will be more around $700 per month, but $600 conservatively.
This doesn’t include the other great things about real estate investing like the principle paydown and the potential for the asset to appreciate.
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Thanks again for all the support and continuing to come back each day for new updates in this saga!
Enjoy this article? My goal is to continue posting about my real estate investing journey and path to financial independence through investing! I want to share my journey with real numbers to people can see exactly what I am doing. Are there other ways to get to financial independence? Absolutely, this is not the only way. But this is the fun of personal finance, it is personal! Checkout more of my content here!