9 Year Look Back
It all begins with an idea.
I’m in the standard process of increasing my rents for each of my rental units as I do every year. In the private market this was always a painful discussion with the tenant who would be frustrated and often ask about doing upgrades to the unit because I’d be increasing the rent by $50 per month so I should be putting a new kitchen in…My annual increases are much different now that I’m currently only renting to Housing Choice Voucher holders. With 11 properties I’m typically increasing a property every other month, some months I have multiple. Increasing a HCV holders rent is based on the HAP contract month and not based on the calendar year. I was reviewing my most recent rent increase today, March 27, 2025 and thought about how at this time 9 years ago I was under contract on this property waiting to close and preparing to get it ready for a housing quality inspection as I knew I would be renting to a HCV holder. This lead me to think about all the numbers I looked at as I led up to making my offer. It was a buyers market in 2016 around the country even in Raleigh North Carolina. Let’s take a close look at how strong of deal this 1 property really was. I’ll do another by the numbers break down in the coming months on 1 of my units in Maine so we can compare geographies and markets.
Official Purchase & Sales signed agreement for 17XX Quail Ridge town home. Closed April, 18th 2016. Purchase price was $105K minus $2,100 from seller concessions bringing my total cost to $102,900.
Excerpt from the P&S on seller concessions:
Debt Service breakdown:
20%
4.5% 30 year fixed conventional loan through BB&T
Total Capital needed $24,000 ($21K down payment plus $5K in CC, minus the $2,100 in seller concessions).
Taxes were $83 per month, Insurance was $38 per month, HOA was $225 per mo.
P&I was and still is $426 per mo.
The total monthly cost was $811 and total rents collected were $1,330 providing a monthly profit of $519. Which at the time was a 25.82% CoC, accounting for the average annual maintenance expenses of 3% of rents. The total yield (cashflow profit, principal paydown, appreciation at 2%) on this property at time of purchase was 40.16% year 1 and by year 10 (2026) annual yield was forecasted at 53% per year.
First HCV Holder tenant moved in on May 1st, 2016 at an approved FMR of $1,330 (she pays utilities).
The current state of this property now in 2025:
My latest rent increase was just approved and goes into effect on June 1st, 2025. I will use this rent rate in breaking down the numbers below.
By the numbers breakdown for this particular property:
Note: Debt service has remained constant as I did not refi.
P&I: $426
Taxes: $197
HOA: $327
Insurance: $81
Total monthly cost: $1,032
My total monthly cost has increased by $260 per month. However, my monthly rents collected has increased by $1,496. Bringing my current total monthly profit to $1,794 (2,826 – 1,032).
As the current numbers sit, here is what this deal is producing accounting for a 3% of monthly rents for maintenance:
I’m just approaching YEAR 9 of ownership. The estimated 53% annual total yield for this property has been clearly achieved by nearly 2 times the expected number as it’s producing in year 9 a total yield of 99.53% (unrealized plus realized gains). However, it’s actually doing WAY better than this because I estimate a conservative 2% annual appreciation which over the course of 9 years would equate to a total appreciation of $20,484. However, the appreciation has exploded in this particular area and I can illustrate below the new value is actually $285,600. This is a total appreciation of $180,600. That’s approximately 11.5% annual appreciation. Which equates to a total annual yield of 139% this year (year 9)
The table below is a side by side comparison of the numbers the first year I purchased this property compared to what I forecasted for the year of 2025 compared to the actual 2025 numbers assuming the new rent rate for the entire year:
