I Tried Buying a Rental Property | The Aftermath

Published on: December 4 2022 by Hayden Bowles

I Tried Buying a Rental Property | The Aftermath

I Tried Buying a Rental Property | The Aftermath

I Tried Buying a Rental Property | The Aftermath

startTime	durationTime	text
00:00:00	00:00:03	you know those homes you see on zillow
00:00:01	00:00:04	that are renting for like a hundred
00:00:03	00:00:06	thousand dollars a month two hundred
00:00:04	00:00:07	thousand dollars a month just absolutely
00:00:06	00:00:10	crazy
00:00:07	00:00:12	high-end rentals yeah well i i tried
00:00:10	00:00:14	something kind of similar here's how it
00:00:14	00:00:19	went
00:00:17	00:00:21	hey welcome back to the channel if
00:00:19	00:00:22	you're new here my name is hayden and on
00:00:21	00:00:24	here we tok a lot about business
00:00:22	00:00:25	primarily e-commerce real estate a few
00:00:24	00:00:27	other things here and there
00:00:25	00:00:29	this video is going to be probably the
00:00:27	00:00:31	most unique real estate video
00:00:29	00:00:33	you have seen all year the reason for
00:00:31	00:00:35	that is i tried something very unique
00:00:33	00:00:38	and it's very unique inside of my
00:00:35	00:00:38	market the city that this property is in
00:00:38	00:00:40	this
00:00:38	00:00:43	doesn't necessarily command a very high
00:00:40	00:00:44	rental price for a luxury rental that
00:00:43	00:00:45	they would consider
00:00:44	00:00:47	something like los angeles and the
00:00:45	00:00:48	hollywood hills yeah yeah there's people
00:00:47	00:00:50	there with some crazy money but here it
00:00:48	00:00:52	was a little bit of an outlier so
00:00:50	00:00:54	it was nothing but a test i've had a lot
00:00:52	00:00:56	of fun over the last year and a half
00:00:54	00:00:57	learning a lot about real estate being
00:00:56	00:00:58	able to try a lot of different things
00:00:57	00:01:00	and this
00:00:58	00:01:02	is just a phenomenal test and i'm really
00:01:00	00:01:04	glad to so far have this experience and
00:01:02	00:01:05	it's going decently well you'll see how
00:01:04	00:01:06	it is in a second when i break down the
00:01:05	00:01:08	numbers
00:01:06	00:01:09	over the first month and a half so for
00:01:08	00:01:11	those who are not familiar i'm currently
00:01:09	00:01:12	sitting in my condo here in puerto rico
00:01:11	00:01:13	which is where i moved
00:01:12	00:01:16	still have a place in arizona but i
00:01:13	00:01:17	didn't need my big house so i rented out
00:01:16	00:01:18	my big house which was going to be the
00:01:17	00:01:19	plan
00:01:18	00:01:21	anyways but i thought it would be in a
00:01:19	00:01:24	couple years after i move in
00:01:21	00:01:25	not six months so i don't want to sell
00:01:24	00:01:26	this house right now you're gonna
00:01:25	00:01:28	understand why
00:01:26	00:01:30	so i turned around and rented it out for
00:01:28	00:01:32	a pretty nice premium
00:01:30	00:01:33	now we're gonna break this down why it
00:01:32	00:01:34	was a little bit risky
00:01:33	00:01:36	here's a picture of the house if you're
00:01:34	00:01:37	interested in real estate at all i've
00:01:36	00:01:39	done like a house tour video and like
00:01:37	00:01:41	showed it it was it was pretty sick i
00:01:39	00:01:42	mean it was by far my favorite house
00:01:41	00:01:45	and you know i'd love to live in it down
00:01:42	00:01:46	the road but i tried a single family
00:01:45	00:01:50	home
00:01:46	00:01:52	luxury rental one door 890
00:01:50	00:01:54	000 purchase price it's worth a little
00:01:52	00:01:56	over a million bucks and uh
00:01:54	00:01:58	this seems like a risk you know a lot of
00:01:56	00:02:00	people advised me against this
00:01:58	00:02:01	in fact when i did a full like property
00:02:00	00:02:02	portfolio breakdown with one of my
00:02:01	00:02:05	friends chandler smith
00:02:02	00:02:07	he was like i don't know if i would do
00:02:05	00:02:08	that man and i broke down the numbers
00:02:07	00:02:09	and he's like okay
00:02:08	00:02:11	like it's kind of there and hopefully
00:02:09	00:02:12	you guys can understand it here in a
00:02:11	00:02:14	moment so
00:02:12	00:02:15	i lived here for six months and i rented
00:02:14	00:02:16	out this property
00:02:15	00:02:18	here were my concerns when i was
00:02:16	00:02:19	thinking like okay maybe i should rent
00:02:18	00:02:21	this out now
00:02:19	00:02:22	i was worried about the period to lease
00:02:21	00:02:24	right it's a high-end tenant they're
00:02:22	00:02:25	usually very partikular
00:02:24	00:02:27	you know they know what they're looking
00:02:25	00:02:29	for i've rented a few homes in this
00:02:27	00:02:30	price range myself
00:02:29	00:02:31	and it's you know you can tell that
00:02:30	00:02:33	they've been sitting for a little bit
00:02:31	00:02:34	longer on the market and they want to
00:02:33	00:02:36	get it rented
00:02:34	00:02:37	i was also worried about the lease up
00:02:36	00:02:39	fee with my management so
00:02:37	00:02:41	i don't handle any of the property
00:02:39	00:02:41	management with any of my properties or
00:02:41	00:02:43	tenants
00:02:41	00:02:44	i don't like for them to know who i am
00:02:43	00:02:45	my name they don't have my phone number
00:02:44	00:02:46	or email
00:02:45	00:02:49	i have all of that automated through
00:02:46	00:02:51	property management and for each tenant
00:02:49	00:02:53	they get a flat rate management fee
00:02:51	00:02:54	per door basically is how you can
00:02:53	00:02:56	consider it well
00:02:54	00:02:58	when they find the tenant because i'm
00:02:56	00:03:00	not the one finding the tenant i'm not
00:02:58	00:03:02	taking pictures posting it online
00:03:00	00:03:03	doing the lease they handle all of that
00:03:02	00:03:05	which is great it takes a huge huge
00:03:03	00:03:08	burden off my chest
00:03:05	00:03:09	but that also cost me half of the first
00:03:08	00:03:11	month's rent
00:03:09	00:03:13	so unlike a duplex that's 1500 bucks per
00:03:11	00:03:15	side or you know one of my 2300
00:03:13	00:03:16	a month homes yeah okay like it's not
00:03:15	00:03:18	the end of the world i guess
00:03:16	00:03:18	percentage-wise it's pretty much the
00:03:18	00:03:20	same
00:03:18	00:03:21	but on this where the numbers were a
00:03:20	00:03:22	little tighter and the numbers were a
00:03:21	00:03:24	lot bigger
00:03:22	00:03:27	them taking half of the first month
00:03:24	00:03:28	really cuts into my cash flow so
00:03:27	00:03:29	we're going to tok about this we're
00:03:28	00:03:30	going to tok about kind of how
00:03:29	00:03:32	everything is structured
00:03:30	00:03:34	i was also a little bit concerned uh to
00:03:32	00:03:37	say at least with the property upkeep
00:03:34	00:03:39	just taxes and insurance alone are a
00:03:37	00:03:41	thousand dollars a month
00:03:39	00:03:42	yes there's write-off benefits in there
00:03:41	00:03:45	but you know i'm also paying for
00:03:42	00:03:47	the hoa the pool the yard there's a lot
00:03:45	00:03:48	a lot of expenses that are pretty large
00:03:47	00:03:50	so it's a lot of money tied up in one
00:03:48	00:03:53	deal and i am dependent upon
00:03:50	00:03:55	one tenant but here's the numbers okay
00:03:53	00:03:57	on the left side over here rental target
00:03:55	00:03:58	price i wanted 6 500
00:03:57	00:04:00	in a moment i'm going to tell you
00:03:58	00:04:02	exactly what the mortgage and overhead
00:04:00	00:04:04	is that's what i wanted to get for it
00:04:02	00:04:05	and i was pretty confident i hadn't
00:04:04	00:04:07	really seen many houses in that direct
00:04:05	00:04:08	area rented out
00:04:07	00:04:09	but i knew the money was there i mean
00:04:08	00:04:11	there's you know a lot a lot of
00:04:09	00:04:12	multi-million dollar homes
00:04:11	00:04:14	in the surrounding mile like hundreds
00:04:12	00:04:14	and hundreds of them there's definitely
00:04:14	00:04:16	a market
00:04:14	00:04:19	you just don't see many high-end rentals
00:04:16	00:04:21	okay it took me 40 days
00:04:19	00:04:23	to secure the tenant and actually get a
00:04:21	00:04:24	lease signed there were five total
00:04:23	00:04:25	people who were interested and toward
00:04:24	00:04:27	the property
00:04:25	00:04:28	two of them very very interested in
00:04:27	00:04:30	submitted applications
00:04:28	00:04:32	one of them they visited the property
00:04:30	00:04:32	twice it was a family uh they thought
00:04:32	00:04:34	they were going to want to stay there
00:04:32	00:04:35	for two to three years i was like
00:04:34	00:04:36	perfect that's probably what i'd want to
00:04:35	00:04:38	sell
00:04:36	00:04:40	and so they ended up backing out because
00:04:38	00:04:42	of whatever reason they wanted to take
00:04:40	00:04:43	it on december 18th which is when they
00:04:42	00:04:44	were moving out of their other home
00:04:43	00:04:46	and they didn't want to airbnb because
00:04:44	00:04:47	they had all their kids and stuff i said
00:04:46	00:04:48	look i'm still living in the property
00:04:47	00:04:50	until the end of the year i had my
00:04:48	00:04:51	management say that and i had
00:04:50	00:04:53	invited my entire family out for the
00:04:51	00:04:55	holidays so it was absolutely
00:04:53	00:04:57	non-negotiable didn't matter if they
00:04:55	00:04:59	paid me more non-negotiable to move in
00:04:57	00:04:59	early it was a january 1st lease start
00:04:59	00:05:02	date
00:04:59	00:05:04	or no lease at all so it took 40 days i
00:05:02	00:05:07	could have had again that earlier if i
00:05:04	00:05:07	wanted to to leave but didn't happen so
00:05:07	00:05:10	40 days
00:05:07	00:05:12	management lease up fee was 50 percent
00:05:10	00:05:14	okay so that's 3
00:05:12	00:05:16	250 full write-off um and then the
00:05:14	00:05:20	monthly management for this property
00:05:16	00:05:21	is 2 150 a month which is more expensive
00:05:20	00:05:23	than any of my other properties it's a
00:05:21	00:05:25	larger property there's more to manage
00:05:23	00:05:27	and more stuff going on but two percent
00:05:25	00:05:28	very healthy percentage just say the
00:05:27	00:05:30	least for management there's three main
00:05:28	00:05:33	types of income with this property
00:05:30	00:05:34	cash flow tax benefits which are huge on
00:05:33	00:05:36	a property of this size
00:05:34	00:05:38	and principal pay down which equates to
00:05:36	00:05:39	over twenty thousand dollars a year just
00:05:38	00:05:41	by paying down the mortgage
00:05:39	00:05:42	so for the six months that i was there
00:05:41	00:05:43	and spending money on the mortgage in
00:05:42	00:05:44	the property
00:05:43	00:05:46	i paid down like ten thousand dollars of
00:05:44	00:05:47	the actual principal
00:05:46	00:05:49	right the equity into the property now
00:05:47	00:05:51	over here on the right side the owner
00:05:49	00:05:52	expenses this is out of my pocket by
00:05:51	00:05:54	owning this property
00:05:52	00:05:56	mortgage four thousand and one dollar
00:05:54	00:05:58	every single month
00:05:56	00:05:59	insurance comes out to about 200 a month
00:05:58	00:06:02	paid yearly
00:05:59	00:06:05	taxes paid every six months 740 a month
00:06:02	00:06:06	hoa 200 a month that one bites a little
00:06:05	00:06:07	bit
00:06:06	00:06:09	pool and yard i'm covering that's a
00:06:07	00:06:14	total of another 520
00:06:09	00:06:14	per month so my total overhead 5
00:06:15	00:06:19	61.
00:06:16	00:06:20	all right so think about that that's
00:06:19	00:06:22	only like
00:06:20	00:06:23	you know like a 900 spread between these
00:06:22	00:06:24	prices so
00:06:23	00:06:26	the way that you guys can think about
00:06:24	00:06:28	this i don't take my cash flow from the
00:06:26	00:06:29	properties it sits in my real estate
00:06:28	00:06:30	accounts
00:06:29	00:06:32	for any repairs that might need to
00:06:30	00:06:33	happen any renovations we want to do
00:06:32	00:06:35	we're actually in the middle of a
00:06:33	00:06:36	renovation on one side of a duplex right
00:06:35	00:06:38	now we had already completed the other
00:06:36	00:06:40	so you know things like that i just put
00:06:38	00:06:42	the money back into the business so
00:06:40	00:06:43	that's kind of the expense side of
00:06:42	00:06:44	things now let me actually show you i've
00:06:43	00:06:48	never shown one of these
00:06:44	00:06:48	i get these in my inbox every single
00:06:48	00:06:50	month
00:06:48	00:06:51	for all my properties it's one long
00:06:50	00:06:53	sheet for my property management
00:06:51	00:06:54	that looks something like this and it's
00:06:53	00:06:56	very very helpful so
00:06:54	00:06:58	each property has its own section like
00:06:56	00:07:00	this it shows total gross income from
00:06:58	00:07:02	the property any expenses on it
00:07:00	00:07:04	there's an income column an expense
00:07:02	00:07:05	column and total balance column as well
00:07:04	00:07:07	as
00:07:05	00:07:08	what is going to be owed via ach to the
00:07:07	00:07:09	owner which is me down here at the
00:07:08	00:07:11	bottom so
00:07:09	00:07:13	this was the first month there were some
00:07:11	00:07:14	miscellaneous expenses miscellaneous
00:07:13	00:07:15	stuff that went on and the lease up fee
00:07:14	00:07:16	which
00:07:15	00:07:18	that bites but i knew it was coming
00:07:16	00:07:19	totally fine i mean it would have been a
00:07:18	00:07:20	whole lot of work and trying to do all
00:07:19	00:07:23	this myself i mean forget about it
00:07:20	00:07:25	even hiring you know a business real
00:07:23	00:07:27	estate attorney to write up a lease
00:07:25	00:07:28	no thanks so i i don't like to deal with
00:07:27	00:07:29	anything like that it's just a passive
00:07:28	00:07:31	investment for me
00:07:29	00:07:33	there was the total gross income
00:07:31	00:07:36	collected you can see the expenses
00:07:33	00:07:39	as well as the balance so this number
00:07:36	00:07:41	is removing all of these expenses and
00:07:39	00:07:44	i'm not sure if they took a super small
00:07:41	00:07:45	holding fee usually we have a 400 uh
00:07:44	00:07:47	amount of money in reserve that the
00:07:45	00:07:49	property management holds
00:07:47	00:07:50	for basically any individual repair so
00:07:49	00:07:52	if like
00:07:50	00:07:53	you know this happens a lot actually
00:07:52	00:07:55	it's kind of scary how much it happens
00:07:53	00:07:56	we have like a plumbing issue with one
00:07:55	00:07:58	of the properties they need like a
00:07:56	00:08:00	toilet unclogged or something
00:07:58	00:08:01	stuff like that a little like you know
00:08:00	00:08:02	the the water out of the refrigerator
00:08:01	00:08:04	doesn't work
00:08:02	00:08:06	any repair that's under 400 my property
00:08:04	00:08:08	management doesn't have to ask me about
00:08:06	00:08:10	they don't have to ask for permission
00:08:08	00:08:11	anything above that they do so they kind
00:08:10	00:08:12	of hold a little bit in reserve
00:08:11	00:08:14	you can see the management fee over
00:08:12	00:08:17	there this is
00:08:14	00:08:19	the dock okay now the actual property
00:08:17	00:08:23	here the cash flow comes out
00:08:19	00:08:26	to roughly 8 689
00:08:23	00:08:27	per month now i knew this property would
00:08:26	00:08:29	cash flow
00:08:27	00:08:31	500 to a thousand bucks it wasn't a main
00:08:29	00:08:32	concern of mine it wasn't something that
00:08:31	00:08:34	i was
00:08:32	00:08:35	trying to make cash flow on obviously
00:08:34	00:08:37	i'm not going to do the rental deal if
00:08:35	00:08:40	there's not some amount of cash flow
00:08:37	00:08:40	now that's not the goal however i did
00:08:40	00:08:42	also
00:08:40	00:08:44	consider maybe you guys let me know if i
00:08:42	00:08:45	should test this i know that this home
00:08:44	00:08:47	especially like right now coming into
00:08:45	00:08:49	spring training in arizona and stuff
00:08:47	00:08:51	this house would easily rent for 450
00:08:49	00:08:53	bucks a night i mean there's a lot of
00:08:51	00:08:55	similar comps like that some that read
00:08:53	00:08:57	for 700 to a thousand
00:08:55	00:08:58	pretty crazy but that would require an
00:08:57	00:08:59	additional upfront expense that i could
00:08:58	00:09:01	write off
00:08:59	00:09:02	which would be furnishing the entire
00:09:01	00:09:04	house completely
00:09:02	00:09:06	and you know even going like somewhat
00:09:04	00:09:08	light on the furniture you're toking
00:09:06	00:09:10	six bedrooms an office
00:09:08	00:09:11	five bathrooms you know two living rooms
00:09:10	00:09:14	an entire basement
00:09:11	00:09:14	backyard like you're toking at least 20
00:09:14	00:09:17	grand
00:09:14	00:09:19	at least now i don't like airbnb rental
00:09:17	00:09:21	model because it's just inconsistent i'm
00:09:19	00:09:22	not guaranteed i don't like any risk i'm
00:09:21	00:09:24	a coward nonetheless
00:09:22	00:09:26	here's some of the numbers now based on
00:09:24	00:09:28	what i put down on the property which is
00:09:26	00:09:30	a little bit under 200 000
00:09:28	00:09:31	uh it comes out to about a five to six
00:09:30	00:09:34	percent cash on cash
00:09:31	00:09:35	i don't really consider it very much so
00:09:34	00:09:36	like that because
00:09:35	00:09:38	i'm not touching the cash flow and i
00:09:36	00:09:40	don't care if it cash flows
00:09:38	00:09:41	so that's just kind of my opinion on
00:09:40	00:09:43	this which is you know it's not
00:09:41	00:09:44	terrible it's slightly lower i'd
00:09:43	00:09:46	probably get an eight percent
00:09:44	00:09:46	realistikally if i was to optimize this
00:09:46	00:09:47	and
00:09:46	00:09:48	probably could have had the tenants
00:09:47	00:09:50	cover the pool in the yard it should
00:09:48	00:09:52	have been 500 bucks a month which would
00:09:50	00:09:53	have really changed this number
00:09:52	00:09:55	um but it wasn't really too much my goal
00:09:53	00:09:56	i just wanted it rented quick
00:09:55	00:09:58	so that as soon as i was out of the
00:09:56	00:09:59	property within two days the tenants
00:09:58	00:10:00	moved in
00:09:59	00:10:02	i moved the next day the cleaners were
00:10:00	00:10:03	there the next day tenants moved in so
00:10:02	00:10:04	it was
00:10:03	00:10:06	no overlap i would have been out of
00:10:04	00:10:07	pocket another month for the mortgage
00:10:06	00:10:09	i'm really curious to see what happens
00:10:07	00:10:10	though in the next year the tenants on a
00:10:09	00:10:13	one-year lease
00:10:10	00:10:14	i'm curious to see if they stay do they
00:10:13	00:10:17	stay after that year
00:10:14	00:10:18	the speed of releasing it out the cost
00:10:17	00:10:20	of doing
00:10:18	00:10:21	so now the reason i'm still holding on
00:10:20	00:10:22	to this house i didn't sell it because
00:10:21	00:10:25	it's gone up pretty nicely in value
00:10:22	00:10:26	i got it under market value the
00:10:25	00:10:28	appreciation on this house
00:10:26	00:10:30	in this area that's exactly why i bought
00:10:28	00:10:31	a home of this magnitude
00:10:30	00:10:33	i don't need anything that large for
00:10:31	00:10:34	myself certainly not
00:10:33	00:10:36	but nonetheless i knew that this house
00:10:34	00:10:38	would be skyrocketing in value so
00:10:36	00:10:40	it was going to be a three to five year
00:10:38	00:10:41	hold for me i didn't plan on renting it
00:10:40	00:10:43	out in that timeline
00:10:41	00:10:45	but now that things happened sooner with
00:10:43	00:10:46	me no longer really being in arizona
00:10:45	00:10:48	more than just a couple months out of
00:10:46	00:10:50	the year dude i don't need a six
00:10:48	00:10:51	thousand plus square foot house that
00:10:50	00:10:53	costs way too much money if i'm not
00:10:51	00:10:55	there so anyways um
00:10:53	00:10:56	rented it out this will be a super cool
00:10:55	00:10:57	test i'll definitely keep you guys
00:10:56	00:10:59	updated with what happens
00:10:57	00:11:01	and overall i would say this isn't going
00:10:59	00:11:03	terribly it's pretty pretty interesting
00:11:01	00:11:05	to kind of see the high-end more luxury
00:11:03	00:11:06	rental side of the market
00:11:05	00:11:08	you guys will see some new real estate
00:11:06	00:11:09	investments later this year as well so
00:11:08	00:11:11	i'm super excited for that
00:11:09	00:11:13	drop a like on this video let me know
00:11:11	00:11:14	what type of real estate content you
00:11:13	00:11:15	guys want to see
00:11:14	00:11:17	i know uh you know we do some
00:11:15	00:11:18	renovations and stuff and people love
00:11:17	00:11:20	that i just kind of like break down
00:11:18	00:11:22	what's going on tok about the cost
00:11:20	00:11:23	i'm always open and transparent about
00:11:22	00:11:24	the numbers and i really hope this video
00:11:23	00:11:26	doesn't come off wrong
00:11:24	00:11:27	toking about numbers it's like bragging
00:11:26	00:11:29	or being a little bit of a douche
00:11:27	00:11:31	anytime that i tok numbers i always try
00:11:29	00:11:32	to make it clear it's purely from an
00:11:31	00:11:33	educational perspective i try to be
00:11:32	00:11:34	transparent
00:11:33	00:11:36	there's nothing to hide here this is as
00:11:34	00:11:38	much of a learning experience for me
00:11:36	00:11:40	as i hope it is for you so hope you
00:11:38	00:11:41	enjoy that i'd appreciate if you drop a
00:11:40	00:11:42	like on the video
00:11:41	00:11:44	um and let me know what you want to see
00:11:42	00:11:45	if you have questions about the property
00:11:44	00:11:47	drop it in the comments section down
00:11:45	00:11:49	below it's absolutely free to do
00:11:47	00:11:51	don't be uh don't be scared to subscribe
00:11:49	00:11:52	as well i heard that's also free i'm not
00:11:51	00:11:53	sure you might have to test it out
00:11:52	00:11:55	and then if you want to learn some more
00:11:53	00:11:57	about e-commerce we have both free
00:11:55	00:11:59	resources and paid resources
00:11:57	00:12:00	uh linked in the description below so
00:11:59	00:12:01	you can like a free checklist you can
00:12:00	00:12:03	check out our facebook ad program
00:12:01	00:12:05	that money and the cash flow for my
00:12:03	00:12:07	actual business is what i've been
00:12:05	00:12:08	storing away for years which allows me
00:12:07	00:12:09	to invest in real estate
00:12:08	00:12:11	so it's been a lot of fun and you guys
00:12:09	00:12:13	will see more of that soon so hope you
00:12:11	00:12:25	enjoyed the video and i'll see you
00:12:13	00:12:25	in the next one peace