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Updated over 5 years ago,
Second Buy and Hold Rental
Investment Info:
Single-family residence buy & hold investment in Urbana.
Purchase price: $72,800
Cash invested: $16,500
Second investment in college town of Champaign/Urbana. Single family home purchased from an older couple that were retiring out of state. Purchase price was $75,000 with a $2,200 credit for some inspection items. Put $8,500 into a cosmetic rehab of the entire house. Currently rented for $1,200 per month with an ARV of around $95,000.
What made you interested in investing in this type of deal?
I had purchased another single family rental about a year before when I was a senior in college and learned a lot. Built a team In Champaign/Urbana (agent, lawyer, contractor, property manager) and now live up in Chicago. I had built up enough cash to invest in another deal so I searched for a few months in my target area, had my agent and some buddies walk the properties and take videos for me. Found it, pulled the trigger.
How did you find this deal and how did you negotiate it?
My agent found it on the MLS. The interior was very outdated and needed a cosmetic upgrade. It had good bones, but was a little overpriced for its current state. It was originally listed for $85k, they lowered to $79,900. I offered $72k we eventually settled at $75k.
How did you finance this deal?
I'm lucky to have a lot of family in the real estate arena. I was not able to qualify for bank financing at the time, but I had an extended family member who was in the processing of downsizing her portfolio and looking for passive cashflow without being a landlord. She's been a great mentor to me and agreed to write a private mortgage on the property.
How did you add value to the deal?
Full cosmetic rehab - ARV of about $95k
What was the outcome?
Currently rented for $1,200 to a nurse. Providing about $200/month cashflow after replacement allowance. Exploring refinancing to a lower interest rate loan next year.
Lessons learned? Challenges?
I learned a lot on this deal. The biggest thing is to build a great team and let them do their part. I originally planned on doing some of the renovations myself driving down on weekends and to self-manage from a few hours away. I quickly realized this was not the investing style I wanted to pursue. Very hard to scale that way. Luckily I was very conservative in my underwriting and accounted for property management expense just in case.