My First Rental - La Quinta

[Clint Reuter]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $83,000
Cash invested: $2,905

Purchased to live in, renovated for ~$25,000, and rented out 4 years later. Cashout/Refi in 2022 to purchase a probate home and add an ADU to house hack.

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

Purchased to live in and after realizing I missed out (on $400,000 in 3 short years, more since) on my first home when I sold after it went up in value $35K, what I thought was a lot of money) I committed to not making that mistake again. Since this home was so cheap, it was easy to hold and rent. Someday I may retire here...but not for a few years.

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

I walked the neighborhood during the 2008 recession and realized this house was a short sale gem during a time when nobody was buying homes. I had been looking for an opportunity to own again and somehow knew this deal would work. It took so long the agent called me to ask if I really wanted it because an investor came in and offered more than I had, but he held true to his word and it altered my life for the better ever since.

How did you finance this deal?

FHA loan

How did you add value to the deal?

I renovated most of the interior. Completely smooth plastered all interior walls, added hardwood floors throughout (myself), then ripped out the hardwood in the kitchen when my new refrigerator had a leak and ruined the floor in the kitchen. Added tile to the kitchen and main hall. Remodeled the primary bath. Painted all rooms. Reroofed. 

Later repainted everything white erasing all my personal color choices. 

Now in 2022 I'm ripping out the backyard trees and replacing a dishwasher before renting it again.

What was the outcome?

The value crept up slowly. Purchased for 83K. Put about 25K into it and a ton of sweat equity. At least it was worth the Redfin estimate which was around $129, then 159, 189, finally in the low 200s...then I stopped watching because it was cash flowing about $1000/month. Then I started exploring more rentals, found bigger pockets, and realized I need to cashout refi and reinvest, which is what I'm doing now. Hopefully buying a $240K probate home and fixing it up and then adding an ADU to rent/house-hack.

Lessons learned? Challenges?

Do quality work and take your emotions out of it. Do what will return the most money.

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

Yes. Mortgage Broker Josef Fernando in Lancaster, CA. Super Nice guy and now a mentor of sorts.