First live in the Liability and Then convert it into an Asset...

[Rob Chiang]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $430,000
Cash invested: $300,000
Sale price: $2,200,000

Single Family Home that was originally a foreclosure. I lived here with my family for 7 years before converting it to an unofficial 3plex and rented the whole building out for 3 years. When I was living there, the home was too big for 3 people (2 adults and 1 baby) so why not get some extra income? I BRRR'd this property twice to buy 2 different apartment deals. I am in the process of 1031'ing these proceeds into an apartment building now.

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

Coming out of a 1400 SF condo, moving to a 3200 SF house with a 4 car garage and 10,000 SF lot was very appealing. I had just obtained my general contractor's license, so this property was used as a showcase for my building/remodeling talent.

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

It was a foreclosure and had fallen out of contract 3 times in 2011.

How did you finance this deal?

My parents provided short term financing (bridge funds). Once the remodel was done, I refinanced and paid them off with interest, points, etc.

How did you add value to the deal?

Expanding the home, remodeling the whole entire house and going crazy on the high end finishes (overbuilt rookie mistake)

What was the outcome?

We enjoyed living at the property. It was probably the nicest rental home in Santa Clara for 3 years. Considering the neighborhood was not the best (had a price ceiling which we broke), we learned that overbuilding a home can be fun while you live there, and also cap your ROI.

Lessons learned? Challenges?

DO NOT Overbuild for the neighborhood! There are certain factors (airplane noise, train tracks) that can't be overcome. In the end, we got one offer from one buyer. We were hoping to sell for $3M in the beginning of 2022, but ended up selling for $2.2M. A huge swing of expectations.

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

Yes we still work with most of the same contacts, unless they retired.