Peter and Kate — Diversifying their Portfolio with Awning
Peter and Kate, a couple in their 30’s, have worked in tech for the last 10 years and recently received an influx of cash. Wanting to diversify their portfolios, they came to Awning to purchase several rental properties. Their goal was to invest their cash into properties that would cover their expenses through the income they generated and appreciate steadily over time.
Through our lending partners, Peter and Kate were pre-approved for a mortgage within 24 hours. They were then able to leverage Awning’s data and team of real estate experts to make offers on, and eventually acquire, three rental properties. The day-to-day operations of their rentals are handled by dedicated property managers, who found and are now managing their tenants. Peter and Kate receive a monthly rent check from their property managers and never interact with their tenant.
1. Awnboarding — One Hour
Peter and Kate came to Awning with the goal of generating and building long term wealth through real estate. They learned about what to expect of the buying process from their Awning advisor, Sean. Awning advisors are experienced and licensed real estate agents supported by a team of analysts and coordinators, enabling them to focus all of their time on our customers. Based on their investment goals, Sean recommended a few markets and strategies to Peter and Kate, who ultimately chose to look at homes in the top school districts of the Sacramento area.
2. Financing — Five Minutes
We referred Peter and Kate to Better.com, one of our partner lenders. They were able to get pre-approved for a mortgage within 5 minutes. They received $2,000 off of their closing costs through our partnership and secured a 3.375% interest rate.
3. Receive properties in feed — One Week
With Peter and Kate’s agreed upon strategy in mind, our underwriting team was able to find and add great properties to Peter and Kate’s feed. They reviewed them on a daily basis and gave us feedback on the ones they wanted to dig deeper into and the ones they would pass on. This helped us refine Peter and Kate’s feed with hyper-tailored properties.
4. Put in 3 offers — One Week
Together with their Awning advisor, Peter and Kate decided they wanted to put in offers on three different properties, knowing that in a competitive market like Sacramento, they would likely not all get accepted. Sean suggested strong and competitive offer prices backed by data and made sure Peter and Kate were as informed as possible throughout the process.
Appraisal Contingency: Waived
Financing Contingency: 21 days
Closing date: 30 days
5. Accepted offer — One Day
Peter and Kate got one offer accepted within a day of placing it, which they were ecstatic about. Their Awning team scheduled a home inspection and communicated all closing details and timelines to them.
Here is the property they purchased in Rancho Cordova, a suburb 20 minutes outside of Sacramento.
Listing Price: $417,000
Offer Price: $430,000
Down Payment: $129,000 (30%)
List to Price: 3%
Estimated Renovation Cost. = $5,000
Actual Renovation Cost = $3,000
6. Escrow — 14 Days
During the option period, the home inspection came back clean, the only necessary repair was the furnace, the interior walls were repainted and the carpets were replaced in certain bedrooms, for a total of $3,000 of repairs. We had already budgeted for $5,000 worth of minor repairs, so the expected returns were not affected by this. The earnest and option fees were paid by Peter and Kate during this time as well. The sellers requested a leaseback for $2,200 a month for two months after closing on the property.
Option Period: 14 days
7. Meet the Property Manager — 30 Minutes
When Peter and Kate’s property went under contract, we introduced them to two of our property management partners. Ultimately, Peter and Kate decided to go with RPM. Their work didn’t start until a month after closing, a month before the seller’s leaseback was scheduled to end. RPM charges Peter and Kate 8% of their total rental income in exchange for all of the services they provide.
8. Closing — Six Days
The closing for Peter and Kate’s property was scheduled for 30 days after their offer was accepted. Better’s financing team kept all involved parties informed and we were able to close on this property on time.
Estimated Rent: $2,150
Actual Rent: $2,250
9. Tenants & Maintenance — Ongoing
Given that the property had minimal repairs needed to get it move in ready, RPM found tenants who moved in a week after the sellers moved out. The tenants are now paying $2,250 every month. RPM handles all maintenance requests and Peter and Kate earn $125 of monthly cash flow.
Cap Rate: 4.1%
Monthly Cash Flow: $125