Buy and Hold Rental Property

[Luke Cullinane]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $75,000
Cash invested: $30,000

This was a damaged property that was in bad shape and was owned by a family trust that didn’t want to take on the rehab.

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

The property had potential to be a great home if someone was willing to do the necessary work.

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

The owners asked me to consult because they knew I was a licensed contractor and had experience in remodeling.

How did you finance this deal?

I got a HELOC loan on another property and was able to make a simple offer to the owner that they accepted.

How did you add value to the deal?

I had to gut the basement and treat mold. I installed a new HVAC system. Sealed and painted everything. Opened up some compartmentalized hallways and closets and changed the floor plan a bit. New appliances. New paint.

What was the outcome?

This has been a solid rental with minimal vacancy. There are very few rentals available in my area.

Lessons learned? Challenges?

I’ve made the mistake of bartering with renters. Labor and services for rent. This affected cash flow and had questionable results on overall property value. Renters tend to do what’s best for them. That isn’t always what’s best for the landlord or the property but I felt it was necessary as construction costs, particularly plumbing are astronomical in my area.

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

No, this one was a simple sale. I should have re-financed when interest rates were low but unfortunately I missed the opportunity. Interest rates have risen 11 times since the current renter took occupancy. The property needs further improvements, roof and exterior and new deck and railing. Unfortunately, I haven’t budgeted enough for capital expense. Still the rent easily covers the loan payment, probably should be charging more to cover upcoming capital expense.