Last month we purchased our first rental property out of state. This month we’re closing on two new projects. So far 2017 is turning out to be a great year! I’ll share more on project number 2 (a flip and almost free duplex lot) in another post, but for now I want to share about our new duplex, which offers a super high ROI.
Return on Investment (ROI) is the benefit to an investor resulting from an investment of some resource. A high ROI means the investment gains compare …
This duplex is a 3 bedroom 1 bath and a 2 bedroom 1 bath in Mount Vernon, WA. It doesn’t look like much, though this little duplex may be in my top 3 favorite properties. Yes… I have favorite properties (based on their return and cash flow of course).
This property will provide $1086 per month in net cash flow after all expenses and will only require $58,500 of initial capital. That means, in 53 months, or 4 1/2 years, we will have recouped our entire initial investment. This doesn’t count the tax advantages we’ll receive by owning it, but that math is a little too hard to figure.
As an added benefit, the appraisal came back at $220,000 so right off the bat I have $20,000 in equity!
Here’s the break down:
So in my first year of ownership, considering the cash flow, principal pay down and appreciation (based on the $20k higher appraisal) my ROI is 60.27%. That’s a pretty darn good high ROI.
Now you may be wondering why I listed the vacancy rate as 0%, and the utilities as $0 and of course you know we do our own property management. The reason why we get to take those typical expenses out…? This property is part of the state supported living program.
The supported living program is similar to section 8, though a third party care provider is involved and acts as a caregiver to our residents, and as a property owner we do not have to place tenants or worry about vacancy as the rent is guaranteed by the state.
The utility bills are also sent to the property and the residents pay them directly, this includes water/sewer/garbage/electricity/gas.
These are long term residents, often staying 10+ years.
This will be our second property purchased for use of this program, and we love working with the state to provide clean, affordable and safe housing for their residents. This is a great property and we look forward to making this one rental units number 17 & 18!
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