Investment Info:

Single-family residence buy & hold investment.

Purchase price: $160,000
Cash invested: $30,000

I purchased this 3BR/1.1BA SFH at a deep discount at $160,000, putting $10,000 down and investing $30,000 to rehab the property. The value of the property is $286,000.

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

I have always been interested in buy and hold and this happened to come across my path.

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

There was a single woman with a child living in the home and over the years it had become somewhat neglected. This woman ended up marrying a friend of mine who had two kids of his own. So this relatively small (1,285 sq. ft.) house now had 5 people living in it. My friend was unable to do the fixes due to the amount of traffic in the home. He originally wanted $180,000 but I was able to get him down to $160,000.

How did you finance this deal?

At the time I had my own company where I would act as a construction property manager for various clients but work was pretty slow. I somehow managed to qualify for a conventional loan but had to put some money into escrow to fix the front stairs. Since I had very little money coming into my household I decided to take money out of my ROTH IRA account to pay for the rehabilitation.

How did you add value to the deal?

I was able to buy low, put minimal amount of rehab work into it and increased the value by over $100,00.

What was the outcome?

It was an incredible deal. Although the cash flow isn't the greatest at about $250/mo., I had done it for valuation purposes. All in I am at $200,000 but it is worth $286,000 and climbing. I was able to get someone to do a 2-year lease. Best yet the family that rented from me works for a national window company and installed new windows for me (free of charge). I plan on raising the rent after the 2 year lease to $2,200 and refinance the house at $200,000, thereby pulling my rehab money out.

Lessons learned? Challenges?

The biggest challenge was finding money to rehab the property. I had very little income at the time and was surprised that I even qualified for the mortgage. Thanks to podcasts like BiggerPockets I was able to figure out that I could take money out of my retirement account to pay for it.

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

No.