PMI Georgia is a full-service Real Estate and property management company. We can, and do, assist our clients with every aspect becoming a successful real estate investor.
In this week’s blog PMI Georgia would like to share some real-life experiences we have had with our clients over the past 10+ years. Both examples below worked with PMI Georgia through the enter property lifecycle – from buying the property, to managing the property, tenants, and maintenance and finally through the sale. For us as a staff it is very rewarding to help our clients achieve success in all areas of RE.
Scenario 1 – Quadplex (4-unit complex) purchased in 2014
Meet Bob and Jessica. Both working adults who dreamed of investing in real estate. The began saving money in 2012 and contacted PMI Georgia soon afterwards to begin the conversation about investment real estate, their budget and wants. This Quadplex was already managed by PMI Georgia and when the owner determined it was time for him to exit real estate investing, PMI Georgia was able to sell the property to Bob and Jessica so they could begin their investing journey. Since the were both W-2 wage earners, the years there was a loss, was actually a gain to them because the real estate expenses reduced their over all income for taxes. With the market being so favorable in the Atlanta area currently, they decided to sell the property and came away very pleased.
Purchase price $140,000
2014 Rental Profit (loss) $ 3,900
2015 Rental Profit (loss) $ 3,100
2016 Rental Profit (loss) $ 21,500
2017 Rental Profit (loss) $ 15,500
2018 Rental Profit (loss) $ 14,300
2019 Rental Profit (loss) $ 1,000
2020 Rental Profit (loss) $ 26,500
2021 Rental Profit (loss) $ 13,500
2022 Rental Profit (loss) (2 months) $5,000
Sales Price $430,000
8-year investment with over a 300% return. As you can see, things were a little up and down with the property, which is very typical with any investment.
Scenario 2 – SFH purchased in a distress sale in 2012
Introducing Emily. Emily worked for PMI Georgia so when an opportunity came up – a hard money lender was “over it” and selling properties at a steal. She was able to purchase the property quickly and rented it for approximately 10 years. Emily eventually left PMI Georgia to start her own business, but soon contacted the company about selling her property. Again, it was quick sale and was placed with another PMI Georgia client and Emily used the proceeds in a 1031 exchange to purchase a commercial building for her now booming business, thus deferring the taxes on the gain from the sale. PMI Georgia still manages this property and is excited to see the outcome for the next owner.
Purchase price & rehab $ 20,000
2012 Rental Profit (loss) $ 1,400
2013 Rental Profit (loss) $ 900
2014 Rental Profit (loss) $ 4,500
2015 Rental Profit (loss) $ 5,300
2016 Rental Profit (loss) $ 6,200
2017 Rental Profit (loss) $ 1,500
2018 Rental Profit (loss) $ 4,600
2019 Rental Profit (loss) $ 8,500
2020 Rental Profit (loss) $ 11,000
2021 Rental Profit (loss) (11 months) $ 4,500
Sales Price $170,000
In this scenario, the client made a 900% return over 10 years. Additionally, the client used the proceeds from the sale of the property in a 1031 exchange to buy a commercial building and therefore deferred profit (loss) taxes for the sale.
Scenario 3 – SFH purchased in 2018 and self-managed for 3+ years
And then here comes Ron and Lori. This couple lived out of stand but did not use PMI Georgia for any portion of the purchase or management service because they wanted to save money. The owners contacted PMI Georgia in much distress to help with a very bad situation. According to the owner, initially, the tenant was a good tenant and paid regularly so the rent was never increased, even though property taxes and insurance costs did. The tenant quit paying late 2021 but did not vacate until February 2022. When PMI Georgia took over the property, it had been completely trashed by the tenant and needed a $6000 trash out and over $50,000 in repairs. The owners did not have the funds to complete the extensive rehab needed and opted to sale.
Purchase price (2017) $225,000
2018 Rental Profit (loss) $ 7,500
2019 Rental Profit (loss) $ 6,000
2020 Rental Profit (loss) $ 4,000
2021 Rental Profit (loss) $ 2,000
Eviction, trash-out & rehab costs $ 60,000
Sales Price (April 2022) $308,000
The property did sale for a small gain, but overall, this was a loss to the owner and a very miserable experience. The purchaser is a PMI Georgia client who plans to rehab the property and rent it for at least $2500 per month. With local property management, the outcome should be MUCH BETTER.
As you can see, in scenarios 1 & 2, some years were better than others but generally, the investments generated revenue in addition to increasing in value. While in scenario 3, the effort to save money on the front end resulted in devastating results later.
* Figures only include information PMI Georgia has knowledge of or handled.
Check out the following articles and partner companies for more information on Real Estate Investing:
https://learn.roofstock.com/blog/fundamentals-of-real-estate-investing
http://whitmirecapitaladvisors.com/
Beth Brown
Financial Controller @ PMI Georgia
