Our First Investment Property - One year later

[Wesley Mullen]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $125,000
Cash invested: $32,100

We started self-educating about REI in December 2020 and by January 2021, stumbled upon a friend who was in the process of buying a new home, which was contingent on them selling their current home. After looking it over and running the numbers, we agreed to purchase it for $125k directly with no agents. Because there were no agents involved, the seller was able to avoid incurring additional costs to make the home ready to sell as well as avoiding commission fees. Therefore, when running the numbers, it was a solid first investment opportunity. The home did some minor cosmetic rehab in which we used our dad to help assist with, taking roughly a month. We had a tenant lined up the next month and had her moved in starting month 3 of ownership. We also were able to get initial rent at $1300/month, so we were just over the 1% rule. We do use a PM and have been greatly satisfied with his service. Fast-forward one year, the tenant has renewed her lease with also a market rate rent increase to $1400/month.

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

We knew we wanted to buy & hold and this home was located in a solid area. Personally knowing the seller made negotiations and the closing process uber simple, especially for our first deal.

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

In discussing our new passion for real estate, a friend from the gym advised they were buying a new house and needed to sell their current one before they could close on the new one.

How did you finance this deal?

Traditional mortgage with 20% down.

How did you add value to the deal?

By working directly with the seller, we were able to avoid agent commissions and the seller incurring additional costs making the home 'sale ready'. After closing, we performed minor cosmetic improvements ourselves.

What was the outcome?

A solid first investment deal that cash-flowed from day 1 with the 1% rule. After one year, the tenant has renewed the lease along with a market rate rent increase.

Lessons learned? Challenges?

The tenant had a number of minor maintenance requests early on and we were afraid of a needy tenant. However, after the only major issue of replacing an older toilet, we have had no major issues to-date. We would be sure to look over smaller details such as the doorbell chime, exterior lighting before rushing to get a tenant filled.