EP 196: An Update on My Rentals

In this episode, I discuss the rental portion of my business. As you may know, I have decided to start buying rentals this year. It was a slow start, as I talked to various investors and worked on raising funds for the project. I am taking it kind of slow, so that I can make sure I buy the right houses at the right price. I also want to make sure that any deal I do is a win-win for both me and my private investors.

About a month ago, I was contacted by a wholesaler in my local market, who I have been building a relationship with over the past several months. I have been working to educate him on the types of houses that I would like to buy, both for flipping and rental properties.  He’s a good guy, and someone I can see myself working with quite a bit in the future. He sent me two properties that are very close together in a town that is perfect for buying a rental property. It is a very solid, blue-collar family oriented town with great houses that are extremely affordable and cash flow nicely.

Once he told me the numbers, I was immediately interested. Of course, there were a lot of things that I needed to know about the properties in terms of their condition before I could commit, but he assured me that he had been to the properties, taken lots of pictures, and that they were in very good shape and needed minimal rehab. Here are the numbers:

House #1– 3 bed 1 bath

Price: $34,000

Rehab needed: $5000 (estimated)

Taxes: $1,585/yr

Insurance: $700/yr

Rent: $735/mo (area will support $800)

Management fee: $0 (I will manage rentals)

Estimated annual return: 16.75%

Revised annual return: 18.15% (only needs $2,000 in rehab)

House #2 – 2 bed 1 bath

Price: $29,000

Rehab needed: $5000 (estimated)

Taxes: $1,540/yr

Insurance: $700/yr

Rent: $700/mo

Management fee: $0 (I will manage rentals)

Estimated annual return: 18.11%

Revised annual return: 21.24% (doesn’t need any rehab)


So, the overall annual return on investment for both properties is a whopping 19.53%!

These two houses are my most recent purchases, and I hope to do more in the coming months.

About the author, Mike

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  1. Max on 07/29/2014 at 8:03 PM

    Fantastic! You are knocking it out of the park.
    Thanks for sharing the numbers.

  2. Bob on 08/22/2014 at 9:03 PM

    If you don’t mind me asking, how did you structure the deal with your private investor? Do you have any exit strategies in place in case either of you want out?

    Keep up the great podcast’s. I enjoy listening to them every chance I get. I always learn something new in every episode. Again, keep up the great work!

    Thank you,


    • Mike Simmons on 08/23/2014 at 5:27 PM

      Hi Bob! I don’t mind at all. The way I structured it with this investor is that they provided 100% of the capital to purchase the property and do initial renovations. From that point it is my responsibility to get tenants in the property, maintain the property, And do all the property management going forward. We created an LLC for doing these properties for which we both own a percentage.

      We do not have an exit strategy as these are intended to be a long term rentals. However, we do have an agreement that if either of us wants or needs to sell a property, then we sell. No arguing no contention. We simply sell it and split the proceeds for our percentage ownership in the LLC.

      Thank you very much for being a listening to the podcast! It means alot!

      • Bob on 08/23/2014 at 11:22 PM

        Ok. I didn’t know if was structured where the private investor receives a monthly “mortgage” payment to recoup his capital over a set number of years or if they get it back when the property sells. It sounds like the latter.

        Thanks again, Mike!

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