$259,000 equity gain one year.

I was asked how my Gem Rental pproperties was coming along. I had a pretty good idea as I was posting the income, expenses and remodeling cost as we went along. Pretty good is not very accurate so I set down and added up all the columns. Keep in mind that we will not be done with the remolding for another 2.5 months or so (January 2011).

We have gained an equity of $259,000 in one year.

We purchased a four-plex and a single family home for $66,000 (Jan. 2011). When completely remodeled early next year, the rental income will be $2,700 per month. At a 10% cap rate this property will have a market value of $280,000. The loan balance is $60,000. The mortgage payment including taxes and insurance is $764. Cash flow after expenses is $2,422 a month. Net spendable cash flow is $1,658 a month.

We purchased a 3-1 single family home for $36,000 (June 2011). It is rented for $650 per month. At a 10% cap rate the value is $69,000. The loan balance is $30,000. The mortgage payment including taxes and insurance is $358. Cash flow after expenses is $650 a month. Net spendable cash flow is $292 a month.

The properties have a combined value of $ 349,000

The properties have a combined loan balance of $ 90,000

The properties have a combined equity of $ 259,000

The properties have a combined rental income of $3,450 a month. ($41,400 a year)

The properties have a combined net spendable cash flow of $1,950 a month. ($23,400 a year)

These properties represent 6 front doors or rental units, with an average of $325 monthly net spendable income per rental unit, well above our $200 per rental unit goal.

Cash invested including a $20K allowance to complete the remodeling is $63,377

Plus another $16,325 from the rent collected. (I projected the numbers for Nov., Dec,, and Jan.)

We have a net equity gain of $196,000 in one year.

I have made a few assumptions. That we will be complete with work by the end of January 2011. That we will be 100% occupied (so far that has not been a problem). I did not allow a management fee or maintenance expenses. Even if you allow 10% for these omissions the numbers are incredible.

If I double these numbers each year for four more years (our business plan) you get $4,144,000 in equities. I know that it will get much harder to do that as the numbers get larger. There for the odds are that will not happen. So I have a more modest goal of $2,000,000 I feel comfortable with that number as a doable deal.

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