The story of my first deal...

[Frank Oudheusden]

I saw a SFH listing pop up late on a Thursday afternoon, I forwarded it to Mark (a realtor, property manager, mentor I've been working with in my target area). Later that evening Mark returned my call while I was the metro into downtown Washington DC to see a friend play a concert at a local bar. I decided to pursue it knowing full well that if it panned out I was going to have a hectic evening.

Sure enough, Mark visited the property immediately and I was walking on the street listening to the play-by-play of each room. I did a quick fundamental analysis in my head and all the numbers seemed to work out and we proceeded with a bid. Mark drew up the paperwork fast as I scrambled to find a FedEx/Kinkos 5 blocks from the bar. I was in the middle of doing the paperwork when BAM! the store manager informed me it was closing. He told me where I could find a 24/7 branch and my fiance, roommate and I proceeded to walk the 15 blocks to the next FedEx/Kinkos. It was during this long walk that I began to freak out. Everyone tells you that the first deal will make you sick despite the fact you have comfort in knowing that the math works. Was I really going to put in a full-priced, no contingency (except financing) offer on a house I didn't even see pictures of...in the middle of the night...in a smelly FedEx store? I made a call to another investor and he confirmed my math was good and reassured me that it was worth the shot. I completed the paperwork despite having the internet machine eat my credit card (a serious meltdown moment).

We grabbed a cab and made it back up town with 10 min to spare before my friends band came on.

The next day I was informed the deal was done and we took it down! Most of the conservative variables we used to analyze the property are coming in better than expected and the returns should be solid. I got that initial boost of confidence most newbie investors strive for, the decisions I made were based on months of reading, asking questions, making spreadsheets and analyzing properties in that market.

The best thing I could take away from this experience is that sometimes being ready to pull the trigger is a lot more than just over coming the initial fear of bidding; sometimes it's about being prepared to do whatever you need to just to have that opportunity.

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SFH - 4BR/1.5B - 1300sqft
Purchased for $49900 (30 fixed - 20% down) [rentable condition as-is]
Rent Comparable - $1150/month
10% property management
8% vacancy
15% repair/maintenance
$400 insurance
$2300 taxes
$5k rehab

Estimated Cash Flow - $358/month pre-tax
Estimated Cap Rate - 13%
Estimated Cash-On-Cash Return - 17% (includes estimated down payment, closing costs, reserves, llc formation, rehab)
Estimated Full ROI - $23% (tax write-offs, mortgage pay-down)

There is probably some captured equity in there too. A 10% cap valuation would put this property at $65k.

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Now onto learning about LLCs and actually closing this thing.

Special Thanks to Mark.

[Frank Oudheusden]

Tear Off Roof - 2 years ago
Energy Efficient Furnace - 5 years ago
Hot Water Heat - Neither New or Old - Prob has 5-6 years left

Property was built in 1920. Had maybe 2-3 owners it's entire life. The title search yeilded NOTHING (meaning the current owner has had it prior since before 1973). It has been very loved, I plan to continue that.

[Ned Carey]

Frank O. congratulations. I see you are in Columbia MD. I am in Laurel. Where is the property? I am guessing it's in Baltimore given the price. It sounds like you've got a good deal. Good luck - Ned

[Frank Oudheusden]

Rochester, NY actually. Forgot to mention that!

I've not looked too closely at the Baltimore market to be honest. I'll check out your blog Ned!

[Michael Galloway]

Frank O. Congratulations! Looking forward to hearing about your next success as well.

[Ned Carey]

I was confused for a moment. So you do live in Columbia MD? Your investment property is in Rochester NY? - Ned

[Frank Oudheusden]

Ned,
Yes you are correct on both accounts.
-Frank-

[Dan Johnson]

Frank,

I have several homes in Rochester NY at that same price point. Where did you find a 30 year mortgage for such a low amount? I typically have to pay cash for all of my properties, because of the low property prices.