On Friday I took a huge step. I closed on my second piece of investment real estate, but my first being a majority owner.
If you saw one of last week’s posts, Financial Freedom – Understanding Financial Statements, then you have a basic understanding of financial freedom, and how your income statement and balance sheet work together.
The four unit property that we purchased was definitely a great deal. When we negotiated the price down and got an accepted offer, we knew it was worth much more than what we would be paying; based on the current income vs the income potential.
Per our lender, we were not able to see the appraisal (valuation) until closing.
The appraisal is an important piece to the puzzle. It can explain a lot. It tells you how good at negotiating Your Business Team is, how good of a deal finder you are and how much money you essentially put into your back pocket for signing on the dotted line.
Our appraisal came in $28,000 over the price we purchased the property for. No we do not get that in cash. But, that $28,000 in equity, added to the 20% we put down; can be used as collateral to buy another, similar property without a down-payment!
We know that come three years from now, this equity will only grow – and quicker than the average property.
Since the previous owner did not stay on top of her investment, her rents got $85 per month, per unit; behind the going rate – in the area. Three years from now, when the rent is up to par, the appraisal will go through the roof.
Thanks for checking us out. Stay tuned over the next few weeks to see the improvements we will be making to the property and a BIG ANNOUNCEMENT on another project of ours!