The Islands - Single Family Buy & Hold

[John Bradley]

Investment Info:

Single-family residence buy & hold investment in Gilbert.

Purchase price: $266,000
Cash invested: $60,000

I partnered with a friend of mine who will do the labor/remodel while I finance and support the deal financially. The agreed upon deal was that he did the labor while living in the property paying the mortgage and utilities and once completed I would refinance him off the property and pay him 50% of the equity gained over the renovation period. The overall timeframe took 2.5 years start to finish and was well worth it.

Appraisal came back at $600,000 due to the increased value since the property was one of the crappier ones in a great neighborhood in Gilbert AZ called 'The Islands'.

Full reno while the main focus was put into knocking a kitchen wall down, cabinets, granite counters, new flooring throughout, update handrails and walls that were dating the property for a more modern day look, new carpet in rooms, new vanities in bathrooms, glass & tiled shower in the master, redoing the deck outside, landscaping and the property does have a pool but we just patched pebbletec since the cost of pools in the Phoenix market is absurd right now.

Ended up cashing out 180k @ 75% LTV, paying him 155k and keeping a little cash in hand while leaving my portion of equity in the house to retain it personally.

Great first deal, did not expect the appreciation from COVID but definitely a great learning process!

1. Set realistic expectations with partners and set mutual accountability
2. Document all receipts and work
3. HAVE SUB CONTRACTORS FILL OUT A W9 BEFORE STARTING WORK
4. Always run numbers conservative, if it beats your expectations even better

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

The property was one of the worst conditioned in a great area. Previously owned by out of state investors with terrible tenants. Needed a whole new renovation since the property was original from the 70s and roof leaked. Seemed like a great opportunity for a value add!

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

MLS, was on the market for 30+ days. Originally posted at $275,000 but we sent the owners our home inspection and quotes from contractors showing why we needed to put a new roof and pool repairs to drop the price for us.

How did you finance this deal?

Conventional loan, this was my first primary house purchase so I pulled from my work 401k with a hardship withdrawl (no penalties but if tax deferred had to pay taxes on the withdrawl) for the down payment.
Renovations were paid for by earned income from work as a Mortgage Banker at the time. (Now mortgage broker)

How did you add value to the deal?

New roof, landscaping, whole new renovation on the interior, redid the deck and patched the pool, fixed pool equipment, knocked out a wall in the kitchen, redid all bathrooms, carpet, flooring, etc. I have a photo album of everything if you'd like to see all the photos send me a DM!

What was the outcome?

75% LTV cash out investment property refinance pulled 180k from the deal after renovations and covid house appreciation happened. Paid my partner 155k and kept the property in my name solely.