First Investment Rental

[Matthew Davey]

Investment Info:

Single-family residence buy & hold investment in Mary Esther.

Purchase price: $54,000

Cash invested: $70,000

This property was a foreclosure townhouse 2 beds, 1.5 baths, 1060 Sq ft, one shared wall AKA end unit. All said and done, The townhouse rented out for 1100 per month. The tenants covered utilities and there is no HOA. After taxes and insurance are deducted ($900 annual Tax +$900 annual insurance =150 per month) the townhouse cashflows 950 per month.

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

Initially the price (54k) and location (next to an Air Force Base).

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

I found the deal on the MLS it was a foreclosure asking 60K I offered 50K the bank countered and ended up at 54K.

How did you finance this deal?

I paid cash for the property (54k) and renovation expenses (16k). I saved money by doing all the work myself.
Financing 80% of 54K may not be favorable and lenders view it as a high risk loan. I believe lenders consider it high risk because they typically do not see all of their interest with these small loans. Had I gone through with financing I would have been looking at over 5k in closing and a 5+% interest rate. I believe at the time (2014) the going rate was around 3.25% - 3.75%

How did you add value to the deal?

I added value by renovating the entire townhouse, myself.

What was the outcome?

3 Year Performance Report-
70K all in
3 yr Cashflow after expenses- 34K
Appraisal 3 years later of 104K
Appreciation- 34k

Lessons learned? Challenges?

Renovation: Start to finish this project took me 6 weeks working 5am-8pm, Mon-Sun. Renovation timelines are not easy to calculate and it took me about double the time I anticipated.
Property management: Some property management companies may offer a 'Finder's Fee'. For $500.00, this specific management company Listed and showed the property, vetted the prospective tenants, and complete all the legal paperwork. Once the tenants were moved in, it was turned over to the landlord.

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

E-rent for online billing.