Wilmington, NC - LTR

[Wes M.]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $182,000
Cash invested: $28,000

MLS deal that was listed below market value.

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

Location. Property in an upcoming area of downtown Wilmington. Single-family one-bed property on a 4,500 square foot lot that could allow for future expansion. Availability of a large yard in downtown Wilmington was also of interest.

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

MLS listing that had a ton of interest. There were over 13 offers. List price was $155,000 -- we offered $185,000 with $4,000 due diligence.

How did you finance this deal?

Conventional loan through SECU. Five-year ARM at 5.5%.

How did you add value to the deal?

Nothing so far.

What was the outcome?

Tenant secured within 4 hours of listing for rent. Initial rent goal was $1,540 per month, but increased to $1,640. I suspect we could have gotten higher rates. I believe many other investors were intending to rent the unit as a STR. We did not want the capital outlay and felt the LTR market demand offered a greater return on our time and money. Cash on cash return at 12% and cash flow of $400 after cap ex/vacancy. We intend to apply payments as though it were a 15-year loan in order to have property paid off. Ideally, this will be the college fund for our two young children. Payments on the 15-year term have the deal breaking even while still accounting for cap ex, vacancy, and maintenance.

Lessons learned? Challenges?

In North Carolina, if you submit an offer with DD fee, technically that money is obligated at the moment the offer is delivered to seller. We considered backing out of the deal after a verbal confirmation from listing broker as we received no signed contract attesting to being officially under contract within 48 hours. We considered backing out and listing broker informed us that $4,000 due diligence would still be required. 

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

State Employees Credit Union for financing. We represented ourselves in the deal. I recently received by real estate brokers license however.