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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

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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

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