First Buy and Hold

[David Shultz]

A family member approached my brother and I, and offered us cash as an interest only loan with the idea that we would invest in real estate. We pay 5% interest on the loan. We took her up on the offer, started an LLC.

After making 8 attempts at making a purchase, we finally closed on a home. It's more competitive out there than I was aware of.

This first house is in a working class neighborhood, but very close to a cool/ up and coming neighborhood. It's a good neighborhood to rent in, but won't be a piece of cake. We paid $55k for the house, and don't expect to pay more than $80k for the entire project (closing costs, rehab, etc...). Needs a new roof, new heat pump, and a pile of cosmetic upgrades.

3 bedroom SFR are renting between $900-$1000 in this neighborhood. I think we will be at the higher end of that. At first glance - how is this looking to any of you more experienced investors?

We only take cash as needed, and thus only pay interest on the amount we borrow. Which, for this first project will be $80k.

We have have another $80k available to us, and I like the idea of finding another rental property with the same vibe. A place that we can rehab and add equity to, and also get a decent rent.

The next step is one I'm not too sure about.

What have we done right? How would any of you navigate this situation in these early stages?