First BRR (still waiting on the last R)

[Evan Kline]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $250,000
Cash invested: $28,000

This property came off the MLS (Jan 2022), and is in a very desirable part of town, but had inherited tenants who were a pain and dissuaded most people from even looking at the house (they wouldn't let the listing agents take pictures of most of the home, so listing was terrible, etc). Appraisal came back at $301K during closing. ARV $375.

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

We live in the neighborhood and have a very good read on value and desirability, down to the block and street level.

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

MLS - we didn't negotiate, but knew we were walking into a tough situation the seller was just trying to get out of (tenant headaches) so were able to purchase $50k under market value, even in it's run down state.

How did you finance this deal?

HELOC from another property for 20% down + hard money for renovation. 7% interest only payments.

How did you add value to the deal?

Cash for keys to remove tenants, then cosmetic rehab. The front porch was an eye sore and we completely remodeled that, then refinished all the floors, painted all the walls, updated all the outlets, updated all the light fixtures.

What was the outcome?

Still waiting on a cash out option, but current price per sqft on the street has our home value at $375k-$440k
Property is rented @ $1,900/month on year long lease

Lessons learned? Challenges?

The biggest challenge was getting the inherited tenants out the door. It was pretty bad - they were refusing to pay rent, had lived there for 5+ years, didn't have a security deposit in place, smoking in the house, etc. and were pretty mad at us for "kicking them out of their home." They were currently paying $1050/month and market rate was $1850 which they weren't willing to come close to.

Engaging in a calm manner, acknowledging the situation sucked for them + offering cash to move early worked