Primary Residence Turned Rental

[Amy Alexander]

Investment Info:

Single-family residence buy & hold investment in Newbury Park.

Purchase price: $498,000
Cash invested: $510,000

Rental property. It started out as my primary residence, but I took a job out of the area and held onto the property and have been renting it out for 6 years now. I hadn't intended it as a rental investment when I bought it, and think that if I want to continue renting, I could get a better ROI elsewhere. Considering selling and doing a 1031 Exchange on something with a better return.

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

I just fell into it. I got a good-paying job elsewhere but thought that I might return to the area and therefore held onto the property and have been renting it out ever since. But I continue to take jobs in other areas and think that it might be quite some time before I move back, so it may not be worth holding onto it when there must be better rental investments out there.

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

I used a local real estate agent who was recommended to me by a co-worker. I used my strong credit and good standing as a buyer to negotiate for a lower price, although I was only able to talk the seller down by a few thousand dollars since it was a seller's market at the time.

How did you finance this deal?

I paid a down payment in cash that I had saved from employment income and took out a first and second mortgage for the remainder. I was later able to pay off the mortgages using a combination of employment income and the rental income that I was earning from renting out the property.

How did you add value to the deal?

I haven't done anything to add value to the deal. Rent has increased over the years just because rent has increased in that area due to the demand for rentals outweighing the supply.

What was the outcome?

I still own the property and continue to collect rental income from it. I have made some money off the investment, but not to a spectacular degree.

Lessons learned? Challenges?

I've learned a lot about dealing with property management companies, as I have been using a property management company to manage it for me. One thing that I have learned is that property management companies don't give much time and attention to owners who just have one single-family property. They have much more important clients to please.

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

I would've recommended my real estate agent, but she is no longer in the business. My mortgages, when I still had them, were sold and bought 3 times and then I refinanced the first mortgage, and can't really say much about any of the lenders. The financial institution that I used to negotiate the refinance ended up being fraudulent and stole thousands of dollars from hundreds of people - how I came out of it without losing my money and actually ending up with a refinance is a long story.