Blue House Buy and Hold

[Charlie Corn]

Investment Info:

Single-family residence buy & hold investment in Clovis.

Purchase price: $80,000
Cash invested: $29,000

Single family home, two bedrooms, one bathroom, built in the 1940s, located in a military community in New Mexico.

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

Looking for affordable investment options, either small multi-family or SFH that would work as a cash flowing investment. This is a broad criteria and at the time we didn't have more specific criteria other than cash flow.

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

I am a real estate broker and we had represented the owner as their property manager, and their listing broker at the time of sale. The property was listed on MLS.

How did you finance this deal?

Conventional loan with 25% down.

How did you add value to the deal?

The home had a floor furnace for heat, and window units for cooling. We installed a heat pump and ducting to modernize HVAC. Updated sewer line and gas line, as well as bring electricity up to code. We worked with the seller to upgrade utilities during escrow, and we upgraded the HVAC after close. The home was also painted throughout the interior and exterior. All in, the repairs and upgrades cost around $8000.

What was the outcome?

We were able to secure good tenants at a fair price. We have only two vacant months since the home has been rent ready during the past four years. At the time, the market was slower and more affordable which made this deal cash flow a minimum of $300 per month after expenses. At full market price today, the home could cash flow at $400 per month or more. We have not raised rent on the current occupants.

Lessons learned? Challenges?

Not really a lesson learned, but a good criteria we applied to this home, as well as others we look at, is the idea that we should only invest in property that we ourselves would feel good about living in. We want to make our renters happy and make a money at the same time. If a property is not up to our own standards, then we don't want to offer it on our behalf.

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

Yes! I represented the buyer and seller in this transaction. We had significant time on the marked for public offers. After two offer contracts didn't quite satisfy the seller, we stepped in and made a strong offer at a good price. We were able to leverage our relationship with the seller and take some stress off their shoulders by understanding their non-monetary needs. The deal worked out for both parties.