I just flew back into Las Vegas, and boy are my arms tired! (OK, that was cheesy). I was in Rhode Island closing on a small apartment building that I had bought at a foreclosure auction. Are you thinking why Rhode Island? The answer is simple. Abundant cash flow. As excited as I am about the future appreciation of real estate in Las Vegas, I am just as excited about the incredible cash flow of 3 family apartments in Providence and Cranston Rhode Island. Now, I certainly don’t expect them to appreciate at near the rate as Las Vegas, but check this out. The building I bought was $131,000 and needs a little over $5,000 worth of work.
On the first floor, I have a tenant that has lived there for 10 years paying $850 per month. I have a tenant living on the second floor that has lived there for 14 years paying $850 per month. And the third floor is vacant and needs most of that repair money, but has 1 more bedroom, so even though it is on the least desirable third floor, with the extra bedroom, we will get at least $750 for it. If we get a section 8 tenant (don’t cringe – section 8 can be wonderful if you screen carefully) we can get $975. So let’s add that up without the section 8 tenant.
$850 1st floor
$850 2nd floor
$750 3rd floor
$2450 per month gross rent.
The annual real estate taxes are going to be $2,376 ($198/mo) and the annual insurance is $2,977 ($248/mo)
If I had a mortgage for the entire investment of $137,000 (just for illustration), and I were paying a high interest rate (by today’s standards) of 7%, my Principal and Interest payment will be $911/mo
So my monthly budget for expenses is;
$245 Vacancy (figured at 10%)
$245 repairs/misc (typical)
$196 Prop Mgmt
$96 Water & Sewer
after I pay the mortgage, I still have $509 every month
Here is the beauty – this is worst case scenario. I have 2 tenants that have lived there for years, so they are not likely to be leave or not pay rent. The new tenant is likely to be section 8 which pays an additional $225 per month (most of there rent will be paid by the state) and I will likely have very little vacancy.
Do you like that?
BTW – I closed with hard money because of the nature of the repairs, and am open to flipping this property. Are you interested?