Build-to-Rent on Benfield

[Thomas Magill]

Investment Info:

Single-family residence other investment.

Purchase price: $75,000
Cash invested: $600,000
Sale price: $269,000

This is my largest new build development to date. I purchase the land from a local jeweler who I tracked down at his business and asked he was interested in selling. After a Valentines purchase as well as a couple others, I was able to convince him this was a good move. There are 4 Single Family Homes built on the site. 2 are built-to-sell and 2 are built-to-rent.

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

I've been following the build-to-rent method for some time and even lived in one for 2 years. After building a portfolio of fully renovated homes I wanted to give this model a chance. So, I started with a couple build-to-rent homes, then a couple more, and then felt comfortable to build a mini development.

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

I found this deal while looking at the deal next door which was a larger piece of land. Unfortunately, I wasn't able to purchase that piece of land but this one still made sense to purchase. I tracked the owner down and approached him at his Jewelry store. I asked if he had any interest in selling it and he said he would think about it. So, I kept going back and buying things for my girlfriend until he sold it to me.

How did you finance this deal?

I financed the acquisition of the land with personal and private money. And, financed the build with a construction loan.

How did you add value to the deal?

Initially, I though I could only get 3 lots out of the land, but after some research and some luck I was able to subdivide the lots into 4 separate lots. This lowered my cost basis per lot by 7k. Then, I built 4 homes on each parcel. 2 homes were built as rentals and 2 were built to sell. The for sale homes are 1530 sq ft and the rentals are 1380 sq ft, both with 3 bed 2.5 baths.

What was the outcome?

The outcome is on going as I just listed all the properties. I listed the for sale homes for 269,000 and the for rent homes are $1585 per month.

Lessons learned? Challenges?

The biggest lesson learned was managing stress. There are larger fluctuations in emotions as larger sums of money go in and out of your account. So, I feel its building calluses for the next deal that's larger... and the next... and the one after that.

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

I hired a GC to do the build. Slate Building Group. They did a great job and the property was very turn key. The construction lender was Finance of America