An Unintended Investment Property

[Thomas Brett Gilbert]

Investment Info:

Single-family residence buy & hold investment in Katy.

Purchase price: $261,000
Cash invested: $7,500

4/3.5 on a cul d sac in Katy, TX.

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

My wife and I built this house planning on living there for awhile. Little did I know, 10 months later I would be relocated...

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

Just drove around until we found a neighborhood that my wife and I liked, then put a contract on to build. Along the way, a realtor solicited me offering to give me "$300 credit at closing." In my ignorance, I thought, "wow, that is a great deal." Then, I found out he was going to make 3% on a $261,000 house, and I had never even met him. I called him back, and said, "I want $5000 at closing." (This pretty much covered my closing cost.) He grumbled a bit, but eventually agreed.

How did you finance this deal?

Originally 15 year fixed at 3.75%. Refinanced (leaving cash in to preserve cash flow) to 30 year fixed at 4.5% once house was about 50% paid off.

How did you add value to the deal?

I installed quality light fixtures and a BEAUTIFUL acacia hardwood floor.

What was the outcome?

This house has been awesome increasing our net worth. I maintained the 15 year fixed (about break even cash flow) until it was 50% paid off. Then refinanced to 30 year, and now we clear $700/month in a fairly competitive rental market.

Lessons learned? Challenges?

1) ALWAYS do your research, and ALWAYS negotiate. The shyster realtor that originally offered me $300 at closing may not have accepted my $5000 counter, but he may have said $4000. Either way, doing a bit of research paid off huge.
2) Having perfect renters as your first is probably the worst thing that could happen. My first tenants were perfect, so when my second tenants were less-than perfect, I had no systems or processes in place.
3) Cul d sac homes limit your tenants.