Investment Info:

Single-family residence buy & hold investment in Peoria.

Purchase price: $280,000
Cash invested: $30,000

The goal of this purchase was to replace my landlord, get started with real estate investing, and build up equity with a smaller single-family home (SFH) purchased in the Phoenix-Metro area.

Asking Price - $275K (Current Market Value)
Offered Price - $280K
Total Due at Closing - $18K
Cost of Upgrades - $12K
Total Investment - $30K

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

The item with the highest weight in my decision was to obtain an SFH in a similar neighborhood to what our ideal future tenant would be seeking to rent in. The BRRRR strategy.

We also wanted to upgrade our own living situation away from the city of Phoenix toward a nice, clean, quiet suburb.

My goal was to find the neighborhoods in my price range that will help me build equity as fast as possible while being comfortable in the meantime.

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

I got busy looking for ideal areas - considering growth rates, crime rates, school district quality, business development, public access, health care facilities, etc. This resulted in a few different potential cities and neighborhoods.

The list of potential properties was constructed using popular websites and real estate agents. This list was then prioritized after physically visiting each area.

Our agent helped us contact the seller and we offered $5K over the asking price.

How did you finance this deal?

A partnership was used to obtain the deal with a 50/50 equity and cashflow split agreement after all of her costs of acquisition were paid back in full from the first refinance.

My partner obtained pre-approval for a conventional mortgage with 3% down and had the closing costs ready in her account before we contacted anyone else.

She agreed to use a portion of her 401K to diversify into real estate.

How did you add value to the deal?

I leveraged my knowledge, skills, and experience while risking my time and manual labor. My partner offered her capital after hearing out my strategy and building trust with me.

I looked up the data for known upgrade valuations in my market over the last year (2019 owner-reported data).

Selected the upgrades that had the most ROI with the least investment needed that I could do myself.

Performed all of the upgrades within 60 days, wasting no time.

What was the outcome?

16-months later, we had acquired $120K of equity in the property (not considering upgrades).

We originally agreed to refi at 1-year, but decided to wait a little longer based on our market growing so fast.

All costs of acquiring the unit and upgrades were paid off, then we split the rest 50/50, paid off our personal debts in full which happened to both be around $25K each leaving us some extra cash, excellent credit ratings, lower monthly housing costs, and wiggle room for any repairs.

Lessons learned? Challenges?

Having an understanding of macroeconomics and wealth cycles was critical to our seemingly "lucky" timing. We already have enough equity again to buy a second property using a HELOC. We are sitting on that cash now and waiting for the right opportunity to go shopping within the next 12-months.

The biggest challenge was getting my partner to clearly see that real estate would solve several of her issues, increase her lifestyle, and increase her savings - if done correctly.

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

Yes, Brittany Axelson from Lake Pleasant Real Estate.