My intention is to purchase many houses. Each house after completion of the renovation and renting should produce a annual return of approximately 5% on the total investment.
A typical example would be a house (with 15-1800 square feet of heated and air-conditioned space) in a good Orlando Neighborhood. This house would conservatively rent for $1,300 a month or $15,600 a year. Cost of operation (management, Taxes, Vacancy, Insurance etc) would average approximately 45% of the gross rent. Therefore the house would net 55% or $8580 per year. If we are to acquire a 5% annual return this would require that the total investment in the house could be no more that $171,600. Assuming that all repairs, renovation and transaction soft cost would be $30,000, we then would pay up to $ 141,600 for the house.
We would like to start the program with a commitment from our investor for at least $300,000 or two houses to start. It is not our plan to purchase houses that are in need of major renovations, therefore we believe that the houses can be purchased quickly (before the market has a chance to rebound) and rented within a couple of months of purchase.
We expect that the holding period would be 2-4 years at which time substantial profits would be made upon sale. Our profit position would be subordinated to yours. By this I mean that you would get your investment back plus 5% per annum before we were to get our share of the profit. My company would provide Brokerage services at wholesale to the venture at 2% (buying and selling). Our company would be paid management fees , overhead and cost (out of the 45%) as incurred. The fees would be at market rate.
I hope this has answered your question. If you have specific questions or suggestions please advise at your earliest opportunity.
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