URI College Rental & Summer Rental
It was September 2021 and I was 23 years old. I just started a new job at Electric Boat and I now had time to look at real estate properties with my Uncle Peter - my realtor at the time - at least once a week on the way home from Groton CT.
The first offer I made was for $450,00 on 46 Austin Street in Wakefield, RI and it got accepted. Joke was on me because I immediately shit my pants and said - oh I didn’t think it would get accepted Uncle Pete. You have to tell the listing agent I can’t afford it. I just had no idea what to do from there so we gave that one up.
8 more serious offers later and I finally got this one accepted on
1080 Broad Rock Road, Wakefield RI! (5Bed, 3 Bath)
List price = $375,000
My Offer = $430,000 → Accepted ✅
Strategy: Buy and Hold. 9 Month URI College Rental (8 mins from campus) & 3 month summer rental (10 mins from Narragansett Beach)
How I bought it
Loan information: Conventional Loan, NOT FHA. YOU DO NOT NEED TO PUT 20% Down to get a Conventional Loan.
I had to live in the residence for 6 months since I applied for an owner occupy loan to get a better rate. We “lived” in it it for 6 months while cleaning the house up and renovating it for summer AIR BNB.
Secured the loan in no time with no headaches thanks to Jarred Polseno - a great friend of mine from URI.
Capital Required | |
|---|---|
Downpayment | $21,500 (5%) |
Improvement Budget including furnishing | $25,000 |
Closing Costs | $5,000 |
Loan Amount (Purchase price + Closing Costs - down payment) | $413,500 |
Loan Interest Rate | 3.25% |
Turnkey or semi turnkey (no large renovation) Real estate deals are analyzed as follows:
First we come up with revenue projections (the Rents)
Then we come up with expense projections
Then we get a quote on the debt service from our lender
Revenue | College Rental (Sept - May) | Summer Rental June - August |
|---|---|---|
Monthly Rent | $5,500 $1,100 / Bed | $13,200 |
Yearly Rent | $49,000 | $39,600 |
TOTAL YEARLY REVENUE = $88,600
Expenses | College Rental 9 month Season | Summer Rental 3 Month Season |
|---|---|---|
Taxes | $550 / Month $6,600 | $550 / Month $1,650 |
Rental Insurance | $300 / Moth $2,700 | $300 / Month $900 |
Mortgage Insurance Since I purchased with less than 15% DP | $175 / Month $1,575 | $175 / Month $525 |
Electric | Paid by Tenants $0 | $250 × 3 $750 |
Water | $25 × 9 $225 | $25 $75 |
Lawn Mowing | Sept & Oct & May $75 / Cut - 2x a month $450 | All Summer - 3 x a month $675 |
Trash Removal | $45 / Month $405 | $45 / Month $135 |
Snow Removal | $500 Budget | $0 |
Wifi | $60 / Month $720 | $60 / Month $180 |
Cleaning Fees | Budget for College Deep Comes out of Sec. Dep. $0 | 20 cleanings x $300 $6,000 |
General Supplies | $1000 | Propane for Grill, Toilet Trees, Etc. $2,000 |
Repairs & Maintenance | $2,500 | $2500 |
TOTAL EXPENSES | $16,270 | $15,390 |
TOTAL YEARLY EXPENSES = $31,660 (or 35% of renvue)
Debt Service | 30 Year Fixed Rate |
|---|---|
Loan Amount | $413,500 |
Interest Rate | 3.25% |
Monthly Payment Principle & Interest | $1,775 / Month $21,300 / Year |
TOTAL YEARLY DEBT SERVICE = $21,300
Now lets do some calculations
Terms we must learn for correct calculations:
Purchase Price = Actual Purchase Price
Debt Service = Principle & Interest Payment
Net Operating Income (NOI) = Revenue - Expenses
1080 Broad Rock NOI = $56,940 / Year or $4,745 / Month
Cash Flow = NOI - Debt Service
1080 Broad Rock Cashflow = $35,640 / Year or $2,970 / Month
Cap Rate = NOI / Purchase Price
1080 Broad Rock NOI = 13.25%
What the hell is a cap rate and why does it matter?
The cap rate is the return on investment you would receive if you bought the property in all cash. This is a great way to compare a real estate investment to a stock or bond investment because typically, you cannot use leverage (debt) to buy stocks or bonds.
Comparison Example: 10 year Treasury vs. Rental Property
If I purchased $430,000 in 10 year treasury notes I would get an annual return of 4.375% or $18,791 / Year.
If I purchased 1080 Broad Rock Road in Cash for $430,000 I would get an annual return 13.25% or $56,940.00 / Year
Gotta Risk it for the Biscuit🤑
Another Key thing to consider is that Cap Rate doesn’t account for appreciation, depreciation or leverage. EVEN MORE UPSIDE.
Technically my personal cash on cash return on this deal is my Yearly (CASHFLOW) / (DP + Improvement costs)
Year 1 Cash on Cash Return = $35,640 / $46,500 = 75%
Next week well get into the depreciation I captured and used against my taxable income in 2024!
If you enjoyed seeing the real life numbers of this deal hit the subscribe button below!
I will be underwriting 1 deal per week and mixing in commercial multifamily, storage, retail, maybe even data centers.
You can submit a deal to be publicly underwritten here - If you want I can hid the address - theres a box to check for that.
If you enjoyed seeing the real life numbers of this deal hit the subscribe button below!
I will be underwriting 1 deal per week and mixing in commercial multifamily, storage, retail, maybe even data centers.
Submit your deals on or off market here for me to publicly underwrite. I can hid the address - theres a box to check for that.