New Construction, long term buy and hold

[Jonathan Small]

Investment Info:

Single-family residence buy & hold investment in Jefferson.

Purchase price: $235,000
Cash invested: $10,000

Property details: 4 bedroom 2.5 bathroom single family house. New construction in a new subdivision. Great school district. Technology and logistic companies are economic drivers. I choose to self mange this property since it is at a higher rent rate and new construction.

Deal finding: Upside opportunity to increase rent over time. This is a high appreciation area. This is currently the only house that is less than 250k. I am expecting to increase rent 10% at renewal. Low rental inventory is leading to higher rent increases. This is a long term buy and hold investment. On a scale of 1-10 with 10 being a grand slam I consider this deal a 8.

Number analysis: I will have about 19% equity before the down payment. Taxes and insurance are about 6% of sales price. Area has about a 2.4% vacancy. I was able to work with my local banker to get the following terms: 3.5% rate, 5% down, 30 yr amortization.

What made you interested in investing in this type of deal?

New construction in an area with great appreciation. Area has great schools, low crime, and great employment.

How did you find this deal and how did you negotiate it?

I found this deal using an online broker builder. This is a discount builder. You don't get to choose any build options. You have to go online and bid for the house.

How did you finance this deal?

I used conventional loan with my bank that offers 2nd home financing. I had to put down about 5%

How did you add value to the deal?

I self managed and saved 10% in management fee. I spend about 20 minutes a month to deposit tenant checks using mobile app.

What was the outcome?

This property cashflows the most for me. No maintenance since it is new construction.

Lessons learned? Challenges?

This was a good deal due to housing and rental shortage. My financing made it a better deal. I learned to invest in great appreciating areas that have high quality tenants. I had tenants give me 12 post dated rent checks so all I have to do is deposit using mobile app.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Mitch Davis was my buying agent