100% Financed, Primary Residence STR

[Joseph O. Reed IV]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $381,000

Used HELOC on primary residence to buy next primary residence. Put another renter in my previous primary residence (see previous investment post) so I have a renter in the main house and one in the studio we built. We now live in a lovely home equipped with a furnished basement (with exterior stairwell) that we offer on Airbnb to increase our cashflow.

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

We were looking to move but with the 2020-2021 market being super hot in our area, we didn't have the funds for a downpayment on a new place. The only way we could buy a new place is if we financed the downpayment and had an additional income stream to pay it down. This property offered that!

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

We used an agent who gave us access to MLS. My spouse found it on the MLS and we wrote a very compelling cover letter to the owners. We also out bid everyone by including an escalation clause with a generous cap.

How did you finance this deal?

We used the HELOC on our primary residence at the time. We met the DTI requirements for the lender due to having 2 renters at the property we'd be leaving.

How did you add value to the deal?

We bought the "new to us" home because it had a basement (very rare in Maricopa County) that we could fix up and rent out (similar to our project in my other post).

What was the outcome?

We ultimately decided that with the noise level (our kids, clumsiness, etc.), Airbnb would best suite our needs. We found that this worked better than we could have hoped! We spent roughly $2300 on supplies, furnishings, etc to set up the space. We set a low ball price to get people in quickly for us to get to Super Host quicker. We were quickly reimbursed for what we spent (also financed) within 2 months. The cashflow from both our properties goes towards paying down our HELOC.

Lessons learned? Challenges?

STR vs LTR. STR has more income potential but also more costs associated with it, time being the biggest cost. Since the unit is on the property with us, my spouse will do the "property management" via the Airbnb app, laundry associated with the STR but hire out cleaners who will deep clean and put bed/towels back in place. I'm sure annually there will be more repairs/replacement costs than our LTR has, but the rent we can charge is above what we could get if we had a LTR staying in our basement

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

Woody Livingston is a great realtor, especially since he is also a home inspector so he really knows his stuff. JC Shea is a phenomenal mortgage broker who is very accessible (he's taken my call sick, driving to/from vacation, and during holidays...I'm needy I guess) and quick to get us to close (needed it in under 30 days to sweeten the deal). Magnus Title worked with us to close this house and they also made closing quick and efficient!