Michigan Property 5

[Matt Jamieson]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $130,000
Cash invested: $106,500

4BR 2.5BATH Single Family Home (1760 square feet)

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

Additional BR from prior home. Good location. Affordable price, in a neighborhood of significantly higher priced homes.

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

MLS. List price was $165,000, after offer and negotiations we agreed to sale price of $130,000.

How did you finance this deal?

30 year conventional mortgage. Used funds from prior cash out refinance at another property for the down payment.

How did you add value to the deal?

Fenced in the backyard, New Furnace and AC, New flooring throughout, Bathrooms fully updated, Kitchen fully updated, and other cosmetic updates throughout.

What was the outcome?

We moved from this home to Florida for a new work opportunity. Kept this property as a rental and tenants have occupied it since that time.

Lessons learned? Challenges?

Connected with two contractors that helped on many of the projects that I was not able to do. This was the most extensive renovation we've completed so far. Challenge was completing all the projects only on nights/weekends, or when we had funds for contractors. Learning about the limited resource of TIME.

[Joe Villeneuve]

Quote from @Matt Jamieson:

Quote from @Joe Villeneuve:

So you have a property worth (maybe) $165k that you paid $106,500 for it.  That means as a rental, if you got $100/month, or $12k/year in cash flow from it, it will take you almost 9 years to break even.  OUCH!!!

Some of the details didn’t come through on the original post.  But, using your math and comparing it to current numbers on this property, it would take about that many years (or more) to make back 100% of my cash purely from cash flow.  This would not include mortgage pay down or appreciation.  Is this what you mean?  

Yes.  Add (or subtract) this to the math.  If it's your money you are adding to the mortgage paydown, that just adds to your cost, and increases the amount of money you need to recover to break even.  Buying equity isn't the same as gaining it from appreciation.