Ugly House Makes a Fine Cash Cow

[Diane Menke]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $35,000
Cash invested: $9,000
Sale price: $225,000

This was a large brick 3 story 3 bed, 1 bath house with a yard.

The kitchen area was very large as was the combined dining living room area. It was great for folks who wanted to do group living. It's near a college in a college town so this made sense for renting it. The feature all our tenants liked was the space.

The house was sold to us by a church that used it as a rooming house for folks trying to reintegrate into the neighborhood.

The area was still a bit rough but improving.

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

It was a no brainer cash cow at a very low price in an up and coming area.

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

An agent we worked with found it for us on the MLS.

How did you finance this deal?

Commercial lending + cash.

How did you add value to the deal?

We renovated the kitchen, the bathroom, replaced windows, roof, some wiring and lots of cleaning and paint.

What was the outcome?

We had years of good rental income, refinanced at least 2x to pull out cash, and we still make a few bucks when we sold.

Lessons learned? Challenges?

This house had a large addition on the back which made it great for group living tenants. But the addition was not to code structurally, and we knew we would have to take it down and rebuild it if we decided to continue to hold it. That didn't make financial sense so we sold it. We no longer buy houses with portions of the house outside the area of the basement foundation as buy hold properties.