After the Crash - My First (and only) Short Sale

[Chris Stephens]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $330,000
Cash invested: $450,000

My first short sale was back in 2010. The home was poorly constructed and located in a C neighborhood. I really didn't like this house or the neighborhood. My agent and I ran the numbers and researched the neighborhood and he convinced me that we should buy this property. The first couple of years were awful. The tenants were deadbeats, the neighbors were mean, and I was going through a divorce.

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

I wanted to try buying an income property via short sale.

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

My agent and I searched for months, this was after the real estate crash and viewing short sale properties was a pretty traumatic experience. This was also the first time that an agent had found me a deal.

How did you finance this deal?

Conventional financing.

How did you add value to the deal?

Remodeled both units. New bathrooms, new appliances, paint, flooring, etc.

What was the outcome?

The neighborhood improved dramatically and I've completely updated both units. 2010 cashflow: $1650, 2022 cashflow: $4955, and the appraised value of the home is $1.1 million, up from $330k in 2010.

Lessons learned? Challenges?

Passive income does not mean that you hire your way out and walk away. You have to keep an eye on the people that you hire. Both the property management company and my landscapers were scamming me. The landscapers charged me for years without actually doing any work and the property management company was sourcing renters and then encouraging my renters to break their lease and buy a property through them (including financing). The turnover was incredible.

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

Yes, although my agent is not accepting new clients at this time.