Simple Dayton Rental Deal

[Darrin Carey]

Investment Info:

Single-family residence buy & hold investment in Dayton.

Purchase price: $35,000
Cash invested: $20,000

This property a single family, brick house on a slab. B-/C+ neighborhood. It's been rented to the same tenant for 4 years. The house was mostly updated before the tenant moved in, and all the major cap ex items were completed. When this tenant leaves, I'll do the last update, a new kitchen, I'll change out the tub surround, and the usual tenant turn items. It's under rented currently, and with those two updates the market rent will increase by $200+ per month.

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

With the cap ex done, and a tenant in place, all I had to do was put the deal together and hand it to the PM. No heavy rehab to do.

I also got to keep a turnkey provider with a poor reputation from getting the property. (Bonus!)

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

This deal was posted on a local online forum for investors. I met the seller and tenant at the property and did the walkthrough. As we walked through, I spent my time listening to the seller and understanding what his primary motivation was. His price was already good, so I looked for an opportunity to get terms.

How did you finance this deal?

The seller carried back 15k for 5 years at 0% interest. The 20k cash down payment was saved from rental cashflows. If the seller wouldn't do a carryback, I'd've used my lending business to put a loan in place (I'm pre-approved ;-) )

How did you add value to the deal?

The seller wanted a super fast sale to pay for a large unexpected expense. I was able to walkthrough the property, and make him an offer with no contingencies (other than clear title), and I was able to close in a few days.
The seller had an appraisal from the previous year for $52,000. A current CMA showed low to mid 50s for current condition.
He was deliberately offering a good price for the fast sale. Speed and simplicity was the most important thing to him, and that's what I offered him.

What was the outcome?

The seller got the fast cash he needed. The tenant got to stay in her home.
We acquired a nice rental property with a nice tenant, and gained 15-20k equity all the same time.
It's a solid win for everyone.

Lessons learned? Challenges?

Always keep your eyes and ears open. This the exact type of deal I like, so I moved fast when the deal was posted. Most importantly I listened to the seller when I got there. Getting the seller finance took about 2 minutes standing in the driveway. I asked for 20k in owner finance, and accepted 15k. If he would have insisted on cash only, I still would have done the deal at the offered price, but pulled an outside loan in for the financing.

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

Outside the Box Real Estate will be handling the property management.
I had planned on using Dayton Capital Partners (my company) for financing, but with the seller terms, it was unnecessary.
Ryan Ingram with Thomas and Grushon is providing the property insurance.