And now for the after….we now have properly screened tenants (which are paying rent on time), an improved property and a decrease in criminal activity for the neighborhood.

 ____________________________________________________________

In February I posted a horrific scene of a recent tax deed purchase in Pensacola that turned into an eviction, that turned into the tenant destroying the property [original post here]. After a few short months of demo and installing a different mobile home, we now have properly screened tenants (which are paying rent on time), an improved property and a decrease in criminal activity for the neighborhood. Let’s break down some #’s.

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Our Cost Summary:

The debris, oh man the debris. The rollaway dumpster guys in Pensacola made some bank on us. We had a total of 8 dumpsters to haul away 14.9 tons of trash. This was just the trash on the outside, not to include the demo of the mobile home that was original to the property.

Nowgoing back to our Tripod of Adopted Investing Criteria:

  • Cash Flow: ✅
    • After all expenses (repair/maintenance, vacancy, insurance, taxes, property management) are considered for this property, we’ll still cash flow $375/month.
  • Cash-on-Cash Return: X
    • With $375/month in cash flow, that is $4,500/yr. Dividing our cash investment of $40,716 by our cash flow of $4,500 we yield an 11% CoCR. On this project, our clean-up and demo costs were much higher than anticipated. Although an ok return at 11%, if we had more accurate cleanup/demo costs during our napkin test, we would have passed on this property as it doesn’t yield our target of a 15% return.

Screen Shot 2018-02-05 at 4.00.05 PM

  • Asset Acquired @ 20% Under Market Value:
    • This property now appraises at $57,000 and with our all in costs of $40,716, we are almost at 30% below market value.

Related Articles:

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