Using and FHA Loan and Direct Mail Marketing

[Melissa Dorman]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $320,000
Cash invested: $20,000

My first purchase with an FHA loan. I sent letters and found it off market. I bought it and put in $20,000 to renovate the unit I would live in. It appraised for $50k more than I paid, the day I bought it. It's now fully rented and worth approximately $450,000 with a GRM of 15 and supporting comps in the area. That gives me about $100,000 of profit, if I were to flip it and sell it myself.

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

Bigger Pockets Podcasts.

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

I sent 500 direct mail letters to multi-family owners. I negotiated directly with the seller, who was out of state. I covered closing costs and she paid the tenant relocation costs, so I could owner occupy. I negotiated by not asking for any repairs and making sure it was a smooth transaction for everyone.

How did you finance this deal?

FHA loan.

How did you add value to the deal?

Renovated the kitchen, bathroom, flooring, and painted throughout the unit. Cost about $20k to do.

What was the outcome?

It appraised for $50,000 more than I was paying and has $150k of equity today. If I did it as a flip project, I would have made about $100,000 in profit. Instead, I hold it as a rental and have great tenants. It cash flows a few hundred a month.

Lessons learned? Challenges?

Direct Mail marketing works. I need to quit my day job as a social worker and become full time in real estate.