Tax Sale Buy and Hold Rental

[Korbin Hoffmann]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $15,000
Cash invested: $85,000

This property was a tax sale acquisition. All in purchase price was $15,000 and the whole house renovation was about $85,000. The renovation included: Whole house replumb, new roof, windows, driveway, porch, landscaping, carpet, paint, ceiling fixtures, refinished hardwood floors, remodeled one bathroom and added another. The house appraised for $205,000, and my equity now serves as a HELOC. It is a rent by the room student rental that cashflows $500 monthly.

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

I found the deal while I was walking to class. I was a student at the University of Northern Iowa at the time, due to COVID and classroom changes I stated walking a different route. This was the only abandoned house within several blocks of the college and the university owned all the properties surrounding it. After walking past a couple times I was far too curious to let it go so I went to the country courthouse and got all the information I could. From there I chased every lead I could find.

How did you finance this deal?

The purchase price was so low compared to the value that I could use the property as a HELOC to fund the renovation.

How did you add value to the deal?

I added value to the deal by adding a bedroom and a bathroom, as well as a complete whole house renovation.

What was the outcome?

The outcome was $500 monthly cash flow and $100,000 of equity built.

Lessons learned? Challenges?

Many lessons were learned on this deal. Renovation mistakes, unnecessary costs, failure to keep receipts,... I was 22 at the time and I had been listening to BP for years. Naively, I thought that with a Bachelors in Finance and Real Estate and hours of podcasts consumed, that things would go without a hitch. That was false. I learned lessons in all areas of real estate investing, and I would advise beginners to underwrite a deal with a large margin of error. There is ignorance debt to be paid.