Rental Property #4 finally closed today! I’m happy to announce that all the papers have been signed and the funds wired to escrow. About $26,000 was needed in total for the downpayment and closing costs. So, no more drama… I hope. I definitely can’t say closing was smooth sailing, because it wasn’t. Luckily, I was able to find a co-signer to help secure this latest deal.
Now that Rental Property #4 is in the books, what’s the next step? Obviously, it’s to secure Rental Property #5!! But that should come as no surprise to anyone following along on this journey. Actually, I already let that “secret” out when I posted details on my latest trip out to Chicago.
Rental Property #5 is under contract, so I will write an update on that property soon. In the meantime, I’m going to take a break and relax a little bit. Closing can get stressful at times, so I’m looking forward to not having to deal with this stuff on a daily basis. This was by far the most difficult loan to date. There always seemed to be another glitch or problem that prevented us from closing on time. In total, the loan took two and a half months to finalize. And I only borrowed $64,500!
I also hear that loans #5 through #10 only get more challenging. I can’t wait. 🙂
I wouldn’t sweat it at all. Get out, relax, and keep on pushing forward afterwards. Definitely looking forward to seeing how houses 5-10 progress!
As an aside, what are you doing to offset maintenance costs? Do you allocate an estimate a XX dollars per month and store that away in an maintenance fund, or would you keep the ball rolling and pay for it out of your personal emergency cash? Just curious as the properties mount up, and you run this more like a business, how you plan on “capitalizing the business” with backup reserves for maintenance issues.
writing2reality,
Yeah, I’ll probably just relax for a little bit… go out and celebrate. After that, it’ll be back on the horse and moving on to the next one!
In regards to maintenance costs, I use conservative numbers when I calculate my cash flow/cash-on-cash returns. So, I generally allocate 5% or so each month to a reserves account. Worst case, at least I do have my job income to turn to. In a way, this might be necessary from time to time b/c my strategy is so aggressive… I’m trying to come up with downpayments every 3-5 months or so… that’ll deplete the savings rather easily.
I’m curious to know how much maintenance I can write-off come tax season. This will be my first year with multiple properties.
Cheers!
Congrats! That must be a relief that it did in fact close. It’s crazy how long it took to close when the amount you borrowed was less than your down payment on the first few places…
Leigh,
Thanks! Yes, I’m very relieved… I don’t have to check e-mails at 5:00 AM in the morning and read excuses on why closing can’t happen today…. sigh…
haha, yeah, my loan was about equivalent to what someone might borrow to finance a nice car! Should definitely not have been so difficult!
Take care!
Congrats on closing on #4! I can’t believe that #5 is already in the works as well. You’re becoming a real estate kingpin. That cash flow is going to pay off in spades. Once the rental cash flow surpasses your goal is it an immediate calling it quits moment or will you look to work for an extra year to save up extra cash? When we get to that point with our own FI pursuits, then I’ve already settled on working at least an extra 6 months to save up a large cash buffer and possibly try to pay down the mortgage on the house some more. I’m starting to look into some local turnkey operations here and would love to close on a rental in the 1st quarter of next year, although I’m still trying to get the wife on board with that.
JC,
Thanks! Yes, I’ve definitely been bit by the real estate bug. Actually, this kind of started when I stumbled on a blog of an investor who wants to own 100+ single family homes, when all is said and done… I’m only aiming for 10 or so, so if he can pull off 100… I should be able to get to 10. Well, that’s my rationale, anyway.
Hmm… in regards to cash flow, I haven’t formulated a definitive plan yet. Honestly, I do anticipate the cash flow exceeding my monthly expenses sometime next year. Actually, once Rental Property #5 closes, I should be well ahead of my expenses. So, in theory I should be able to check out at that point… but I also want to attempt a dry run while I’m still working… and there’s that part of me that wants to keep working so I can really snowball this thing. I would hate to miss out on that opportunity… This is along the thinking of, well if I only work 1-2 more years… I could buy myself 10+ years of freedom due to the compounding, gains, etc. I have a lot to think about… but I’m going to just focus one step at a time. I figure that’ll be a good problem to have.
Good luck with the real estate venture! You can always contact me if you want to discuss anything. I’m curious to know what you think about those local turnkeys. I may want to get into that market as well!
Cheers!
Congrats on #4! It’s fun following along as you build your empire 🙂
Jay,
Thanks! Rome wasn’t built in a day… or so I keep telling myself… and all I want is a measly 10 houses 😉
Best wishes!
Nice job! You are buying at a fairly fast pace. You’ll be at 10 properties before you know it. I’m hoping to add a third rental next year. I’m actually in the process of buying a commercial space for my business and may post about that soon.
AAI,
Good luck on rental #3! The commercial space sounds pretty sweet too. I’m interested to see your post on that.
Once I clear 10… or retire, I would like to go commercial (probably start with apartments) in my next career.
All the best!
I can imagine that. If they stretched you now at the loan #4 those other loans will be killing, murderous, terrific… just wait for those trained experts telling you what you can and what you cannot. Funny, four years ago they lent money to any shmoho who showed up with brushed teeth and comb hair and now they pretend how responsible they are. We are really being thrown from one wall to another.
Martin,
Hah! That’s right, it used to be super easy to get loans, and now it’s a pain in the you know what… Well, luckily, lenders have started to loosen up a bit, and it shouldn’t be too difficult to get 10 these days. My problem is I had too much debt and they wouldn’t count rental income from my other 3 properties… you just have to have enough seasoning to clear the 2 year tax return requirement. Now I know.
Moving on to #5 now!
Cheers!
Good luck on your next #5 hunting. Do you have anything in your scope?
Martin,
Yes, #5 has been identified. A post about it should be out sometime soon. Just ironing out some details first…
[…] past week was exciting — I finally closed on Rental Property #4. In addition, I attended a REI meet up and got to meet some local investors. Finally, I was in […]