Podcast episode (recorded Jan 19, 2020) where hosts Jason Hartman and Elizabeth Embry with investment counselor Kerry review two featured rental investment opportunities: a renovated 3-bed/1-bath brick property in Baltimore, MD (listed $165,000, rent $1,600, projected net cash flow ~$429/month before insurance, roughly $370/month after estimating insurance; ~30% projected overall ROI) and a new-construction property in Robinsonville, MS (listing $149,900, gross rent $1,295, projected net cash flow $283/month, ~8% cash-on-cash, ~32% projected overall ROI). The episode highlights pro forma assumptions (8% vacancy, maintenance rates, 6% management fee) and advises investors to use standardized performas on jasonhartman.com.
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Welcome to win the Women Investing Network, the podcast where you can learn from successful entrepreneurs, business leaders and real estate investors who are winning in business and life. Learning from others is the fastest way to grow your skills, gain knowledge and avoid pitfalls so you can win. Join our hosts, Elizabeth Embry and Jason Hartman. Elizabeth is a seasoned real estate investor, experienced corporate executive and skilled mentor. Jason is a self made multimillionaire investor, entrepreneur and highly acclaimed thought leader. Together with their successful guests, you'll get the tools you'll need to win.
Hey, I wanted to invite our investment counselor Kerry back to talk about a couple of featured properties. Just a quick little update. You've got two of them today. Which one do you want to talk about first?
So let's start with the Baltimore, Maryland property.
Great.
So this property, it's a three bedroom, one bath, brick bombshell is what they call it. It's listed at 165,000.
It's a good looking property. You know, our local market specialist there does the best renovations. I love the way, at least in terms of the way the houses look, they know how to package them, right? I mean, would you agree with that? Yeah, they're very appealing, very appealing looking properties. Super. They just make them really cute and visually desirable. Yeah, they do a good job.
And they also do a good job on their rents. So this property is listed at 165,000 and it is currently rented at 1600.
So it's already rented, pre rented, right?
Yep. Majority of this market will only market the properties tenanted, so. So at closing you're pretty much cash flowing day one, which is a nice difference. And yeah, so then on this one you are net cash flowing at 429amonth.
But wait a second. One of the things we're always doing is we're always picking apart these performas as our local market specialists upload them to the jasonhartman.com website. And they missed something. They didn't put the insurance quote in here. So it's not gonna be that high. I knew that was like too good to be true. Now it's still gonna be fant because maybe that's going to lower your cash flow to a positive cash flow projected. I'm just going to guess here because I have so much experience doing this, that that cash flow is ultimately going to be about positive, maybe $370 a month, which is phenomenal. Okay, that's excellent, excellent cash flow for a property like that with only 25% down. So good, right?
Yeah. All new flooring, new H Vac new roof. And the nice thing about this market too is they have a 6% management fee. So it's one of the lowest.
Yeah. And they've got the vacancy rate in there. We require them to put that in the performance of 8% per year. That's one month per year vacant. So you know, it may be occupied for two years and the vacancy rate may be only 4%. Or you know what, if you have a problem and you get a bad tenant and you've got two months of vacancy in between tenants two years from now, then you'd average at 8% per year. They've got a high maintenance percentage on there because this is not a new property obviously at 8% maintenance, which is very conservatively estimated, I would say so, yeah. That's fantastic. I would guess that when the insurance number is put in here, Carrie, that the overall return on investment is going to hover around 30% annually projected all in return on investment and cash on cash return that of course doesn't include any appreciation is going to be around 8 or 9% annually. That's phenomenal. That's just phenomenal. If you want to understand. Because I know that saying for the novice investor who doesn't understand the way these numbers are calculated. 30% annually, are you kidding me? That's too good to be true. Not with income property it's not. Okay. And that's why it's the most historically proven asset class in the entire world because it's a multi dimensional asset class. If you want to understand better how these numbers are calculated, go to jasonhartman.com There's a fantastic video that is free on the front page of our website that explains all of this. It goes through every single number on the performa on the property pro forma and tells you how it works, why it's that way, what to look for, anything you want to know. It's a great free video, 27 minutes. The best education you'll ever get on how to analyze an income property for free. Right on the front page, the homepage of Jason hartman.com anything else about this one, Kerry?
Nope, I think that's it. But similar to what you were saying, you know these local market specialists, they take pride in their properties, so. So sometimes you'll get a pro forma from them and it might show 2% vacancy, 1% maintenance. You know, don't reference that.
Don't believe it.
Go to our site, look at the performas and look at what actually your returns will be.
So just to be clear on what you meant there. Sometimes after you are introduced through one of our investment counselors to a local market specialist in any one of our given markets, they will send you performas with their own format. Right. And what we really believe in and talk about all the time and require of them is that they standardize this stuff. So you want to be looking at it in our format so that you get good at reading one type of pro forma and you really know how to analyze and evaluate a deal better. So you can see those@jasonhartman.com in the properties section and ask the local market specialist if they're talking to you about other properties they have or whatever, tell them you want to see it on our Performa. Okay. When I started doing this back in 2004, that's the first thing I did. I standardized this stuff so you don't have to be a detective and get the wool pulled over your eyes by sellers and local market specialists that are trying to hide something. It's all out there in the open. And you use this standardized Performa, you'll be a lot better off. Okay, tell us about the second property in Mississippi.
So this is with one of our Memphis local market specialists. It's on just a southern tip of Memphis in Robinsonville, Mississippi. And this is a new construction property. They just completed four more of these in 2019 and they will have around seven more in 2020. So the listing price on this property is 149,900 and the gross rent is 1295, giving you a nice net cash flow of 283 per month and an 8% cash on cash return.
Now those are the projections on the pro forma. Is this one already rented or is this the projected rent?
We have recently sold a few that have those rents in place that already tenanted with that.
Yeah. Fantastic. Okay, so projected cash flow of 283 per month based on 25% down. You would need about $45,000 all in to buy this property with your closing cost. And again, that varies a little bit. So make sure you get the detailed quote on the closing costs from the lender, the overall return on investment with our assumptions in here of 8% vacancy and this one, 3% maintenance. Okay. Because this is new construction, so you probably won't even have 3%. Your first couple of years would probably be 0% or close to it. Cash on cash return, 8% annually, debt coverage ratio 1.48%. And overall return on investment projected at 32% annually. Excellent, Kerry. Anything else you want to say on featured properties or markets before you go.
That's it. There's a lot of properties out on the site, Jason hartman.com properties or reach out to your investment counselor for the recent inventory list.
Yep. And you can also call us at 1-800-hartman-KERRY. Thanks for the update on these properties.
Thanks, Jason.
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