First out of state purchase

[Nick Maugeri]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $90,000
Cash invested: $15,000

Our first out of state buy and hold. Purchased with an existing tenant and currently honoring a lease that is $300 below market value. A new lease will be established to the realized market rents. Realized cashflow in year two should be $500 monthly. This was a safe investment, but it got the ball rolling. With appreciation, we should be able to refi and pull out quite a bit of our initial investment.

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

Safe and stable, with existing tenant and new roof - unrealized cashflow in this property was the most appealing.

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

Local realtor, who is the best, negotiated by offering multiple offers on one property.

How did you finance this deal?

Conventional finance at 85% LTV.

How did you add value to the deal?

Raising rents after existing lease expires by $100 after first 8 months of ownership.

What was the outcome?

Buy and hold long term.

Lessons learned? Challenges?

You have got to have persons that are competent, willing and able to operate in an effective manner, that are willing to operate at your standards.

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

Absolutely, any day of the week.

[Dan H.]

>A new lease will be established to the realized market rents. Realized cashflow in year two should be $500 monthly.

This is a topic of a few threads on BP. Are you better off raising rent to market or staying slightly below market. What we do is our mediocre tenants' rents stay very close to market rate. Our best tenants we let their rent a little below market rate.

Why do we choose this route? A tenant moves out there is a cost. A cost from the vacancy and a cost to flip the unit to the next tenant. Many PMs charge for new tenant placement. The new tenant has a certain amount of risk no matter how well you screen them. It could be little stuff like they are high maintenance and complain about everything, it could be that they are a little messy/dirty, it could be they try to bend the rules, it could be that they do not get along with the neighbors, etc. A lot of these issues are difficult to ascertain in a screening.

So we choose to keep our best tenants a little below market rent because it makes our life easy and can be the financially prudent decision.

Something for you to consider. Best of luck in this new chapter of your life.