First Home Purchase (August 2015)

[Stefan Shirley]

Investment Info:

Single-family residence buy & hold investment in Ames.

Purchase price: $127,000
Cash invested: $30,000

My wife and I had extra cash and decided to purchase this three bedroom, one bath home with the intentions of using it as a rental property. This is a buy and hold property as we will move to Ames, Iowa upon retirement (2022).

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

We were fully investing in our 401ks and Roth IRAs and even some into the stock market. With the extra income we had, we decided to purchase this little place. My wife's family lives in the town (my sister-in-law is next door) and we plan to retire here in 2022.

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

My sister-in-law told us about the place. She did a walk through and suggested it was worth the asking price. We purchased it sight unseen and although we may have spent a little bit more than we should have, it's a great first rental property.

How did you finance this deal?

We used a conventional loan through a local bank and put down 20%. The 80% was financed at 3.25% over 30 years. We're scheduled to pay it off by the end of this year since we've been making additional payments.

How did you add value to the deal?

All we needed to do was to clean it up, put in a new garbage disposal, front door, and a fresh coat of paint indoors. Overall, the clean-up made a world of difference.

What was the outcome?

The outcome is that we could raise the rent to a level that pays the mortgage and provides a little bit extra for the things we may need to fix in the future.

Lessons learned? Challenges?

We used my college friend as the realtor to purchase the property and this was his first deal. The problem was that we used him as our property manager. In doing so, the property went unrented for 7-months and when he finally got someone to sign a lease, it was only for 6-months and ended on December 31. We let him go and manage the property ourselves. We have a GREAT tenant from California now.

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

None.