1st buy & hold investment bailed out by appreciation

[Eric Van Deman]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $425,000
Cash invested: $12,750
Sale price: $520,000

Summary of our 1st investment - 4-unit property in Denver. We bought with FHA mortgage to live in one unit and rent the others. Eventually rented out all four units and sold via a 1031 exchange to acquire 7 units in beach communities near Tampa, Florida.

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

-Obtaining FHA financing with very limited money down
-Neighborhood was up and coming, so there was a path to appreciation
-Rent from other units would result in very low living costs

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

Deal was listed on the MLS

How did you finance this deal?

3% down FHA financing

How did you add value to the deal?

This was our first investment property. As we were strapped for cash, I did my fair share of the maintenance, cleaning, painting, etc.

What was the outcome?

Completed a 1031 exchange into a couple small multi-family properties totaling 7 units in beach communities near Tampa.

Lessons learned? Challenges?

- Looking back, it was prime for some massive value add through interior renovations but as a cash-strapped, uninformed newbie investor, we didn't capitalize on that.
- We definitely overpaid for the property at the time as we were trying to strike a balance between somewhere we wanted to live and investment returns. If we had been looking solely to optimize cash flow and appreciation, we would've picked another property.

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

Sylvia Theissen is a good central Denver realtor, and you won't find a better residential broker for conforming loans than Matthew Hibler with Cherry Creek Mortgage.