@Carlos I try not to be so hard on myself since it you don't really think about it, that's the plan your follow. After all that's what everyone does.
Case Study: The First House
We found the property through an online portal setup by our realtor. It was a bank-owned foreclosure which had been on the market for more than 100 days. The property was in pretty good condition (for a foreclosure). Here are a few details of the rennovations:
* New flooring everywhere except the kitchen.
* Interior/Exterior paint
* Fence repair
* Replace all the fixtures
* New kitchen appliances
The repairs took about a month to complete.
Here are the purchase details (some numbers are rounded):
ARV: 105,000 (After repaired value, confirmed by appraisal)
Closing Costs: 4,200
All In: 86,200
"Hard Money" loan. 70% LTV (loan to value, where value is the ARV), interest-only @ 16% interest, 6 month term. More on this later.
Loan amount: 73,500 (70% of 105k)
Paid at closing:
All In - Loan = 86200 - 73500 = 12700
3 months of interest payments, a refinance into a conventional mortgage, and a few more expenses (landscaping, additional repairs) added another $2100 out of pocket.
Total out of pocket: about 14800
We had a deposit and a signed lease with a nice family for 950/month before the repairs were done. After the mortgage, taxes, insurance, and a maintenance fund we net $211/month. They pay electronically with an automatic transfer and so far haven't missed a payment.
At month three, we refinanced into a 30 year fixed mortgage at 5.5%.
A note about hard money: some people scoff at how expensive this kind of loan looks on paper - and it is. But it has a a lot of advantages over any bank loan which I will cover in another post. Besides, it's meant to be temporary.
211*12/14800 is a cash on cash return of 17.1% before taxes.
Our new loan is 77,625 and it was reappraised at 103k which means we captured about 25k in equity.
We plan to keep it for 3-5 years.