My first home, turned rental

[Tyler Madden]

Investment Info:

Single-family residence buy & hold investment in Englewood.

Purchase price: $215,000

Cash invested: $50,000

Mine and my wife's first house purchase, was our primary for 4.5 years. Spent those years remodeling and upgrading all aspects of the house extensively. Borrowed against our equity on this house to purchase and remodel another house before turning this one into a rental that we rent for a cashflow of about $600/month after making interest payments to the HELOC.

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

Kind of fell into the concept after remodeling the house for myself and my wife's own enjoyment. After realizing that we could upgrade and leverage the first house to acquire another I became very interested in the extrapolated opportunities available by continuing to do what I had already begun.

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

My wife and I found the house by searching the MLS religiously, we just wanted to buy our first house... there was no element of it being an "investment" beyond just gaining equity by owning vs renting. We hired a real estate agent out of necessity because we just needed them to unlock the doors of the houses we were finding. Really, they were minimally beneficial during the process; but we closed the deal.

How did you finance this deal?

FHA

How did you add value to the deal?

Extensively remodeling the interior: changing layout, remodeling bathrooms, refinishing existing hardwoods, new baseboards, door/window casing, paint throughout. Exterior upgrades: remove and reallocate fence line to create a more private backyard, install modern 7' horizontal fencing, add large concrete patio in backyard, sprinkler system, sod, firepit, planters, etc. Lots and lots of small things over time, the goal was to essentially modernize and upgrade every aspect of the house for us.

What was the outcome?

Massive increase in equity, allowing us to eventually tap into with a HELOC to purchase and fund renovations on our new house. This house is now highly rentable and returns a generous monthly cashflow with minimal maintenance or upkeep.

Lessons learned? Challenges?

Don't overspend on things that will ultimately be for renters. It's nice to have nice things for yourself, but knowing when to say when is key while deciding how fancy to make things. There's a time and a place for luxury.

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

Negative.