Lorraine Castro is a real estate broker and CFRI’s Membership Director. She and her husband Richard bought a 3 bedroom 3 bath 2,378 sq ft house with 2 car garage at 785 Silhouette Ct, Longwood back in 2005 as a rental property.
It was listed at $215,000 and they paid $203,000 by getting 100% bank financing which was easily available then, plus Lorraine earned a commission on the purchase price which they used to pay closing costs. Mortgage payments were 6% interest only for 10 years and adjustable and started at $1,142/mo PITI.
The house had a brand new A/C and was move-in ready for a tenant. They rented it out for $1,550/month. From 2005 to 2017 they saw the market go up, then down, then up again. They had six different tenants move in and out, and nobody stiffed them on the rent or left the house damaged.
Lorraine recommends to screen, screen, screen your tenants so you won’t have horror stories! Over the twelve years of ownership the lowest rent they collected was $1,495/month. The house was only four miles from where they live, and easy to fill and manage since it is in a great location. They did put on a new roof in 2009 which was paid for by insurance due to hail damage. They also converted the “hobby room” into a real 4th bedroom by adding a closet.
In 2015 their mortgage payments jumped up since the loan started amortizing, and reduced their cash flow. Plus the interest rate started creeping up. It had gone down as low as 2.25% with mortgage payments of less than $400/mo giving them an average of $600/month cash flow for much of their ownership. When the last tenant moved out in August 2016 Lorraine and her husband decided to renovate by spending about $30,000 on a new kitchen, replacing some flooring, and renovating the three bathrooms.
They listed it on MLS in Feb 2017 for above market at $275,000, knowing they would be happy to sell at $260,000. They went under contract in a day and a half. Their first offer was for $263,500 from a conventional loan buyer with a $100,000 down payment. They accepted the offer quickly since it was strong, and Richard feels your first offer is usually your best. Plus, they were on vacation and wanted to relax without having to field any other offers.
It closed 4 weeks later, and they made about $30,000 in profit from the increase in property value. Lorraine did not collect commission on the sale, preferring to take a higher purchase price which would be taxed lower at long term capital gains rates. Plus they had collected about $80,000 in net rents over the 12 years. Not too shabby for a zero down deal!
A bonus for the buyer was that the City of Longwood was installing city sewer at no cost to residents while they were under contract to buy the house.
Reprinted Courtesy of Central Florida Realty Investors. Visit www.CFRI.net From the June 2017 issue of the CFRI Newsletter
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