Sold 2021Family Home Converted to a Rental

[Josh Nelson]

Investment Info:

Single-family residence buy & hold investment in Okemos.

Purchase price: $350,000
Cash invested: $10,000
Sale price: $435,000

Primary residence converted to a rental after 2 years.

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

This was purchased as a primary residence.

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

Found on the MLS. Was one of 5 offers. We won the deal by going $15k above asking price and waiving inspections.

How did you finance this deal?

Conventional financing. 5% down.

How did you add value to the deal?

Converted to a rental. Compliance items such as adding smoke detectors, hand rails, fire resistant garage entry-door and new stairs outside. Only about $3k was spent to make upgrades and improvements to the property.

What was the outcome?

Operated as an executive high-end rental for 2 years and cash flowed nicely while rented. However, after tenant moved out on 9/30/24, the pool for interested tenants was shallow and so we listed the property to test the market and ended up getting an offer at asking price within a couple days. We lived in the property for 2 years and rented for 2 years to tenants, so by selling now, we ensured that we could avoid capital gains taxes.

Lessons learned? Challenges?

I learned that with an A-Class tenant expectations are higher and had to step up my level of service. Challenges related to maintenance of the property. It sat on 1.5 acres with lots of garden beds and trees. As such, just upkeep and maintenance of the yard became a factor in deciding to sell. Also, when not occupied, the PITI on a high-end home can quickly erode prior cash flows.

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

I represented myself on the sale.