First Ever Investment

[Avery LeMmon]

Investment Info:

Single-family residence buy & hold investment in South Salt Lake.

Purchase price: $325,000
Cash invested: $12,000

This home was intended to be our primary residence that we house hacked. In the end, we put tenants in the downstairs unit and flipped the upstairs to put tenants in there as well.

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

In an attempt to get into real estate investing, I wanted to start where I knew I could: house hacking. I was interested in developing a rental portfolio so I could "retire" young in order to spend more time with my wife and future children.

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

Instead of doing my homework in class, I would find myself scouring Zillow for homes that could accommodate my family and another family. My wife and I would walk a property here and there but finally came across a small home in South Salt Lake that had a mother-in-law apartment. After realizing how dirty it was, the work my wife and I would have to put in to rent it out, and the seller's motivation, we offered 25k less than asking price. The seller took the offer without countering.

How did you finance this deal?

This deal counted as our primary residence when we applied for a 30-year loan. We came in with a 3% down payment that we had save by living below our means for a few months.

How did you add value to the deal?

We did numerous remodels to both units in order to raise rents. There were less-than-neutral paint colors throughout the home, awkward kitchen cabinets, and neglected yard care to name a few things. My wife and I aren't handy so we hired out some of the work but we did do as much work as we could. We somewhat regret that.

What was the outcome?

To this day, we still own this rental. It has had 100% occupancy since then (presumably due to location). We have amazing tenants. We will most likely sell this a few years down the road with full occupancy to 1031 exchange it into something larger.

Lessons learned? Challenges?

My wife and I faced tight time frames and financial stress for the first few months with this rental. From this, we learned the importance of budgeting to have the work done by someone else even if you will contribute certain parts. In addition, we developed a better understanding of lease contracts that protect the landlord and how to compose oneself as a landlord.

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

We were blessed to work with Dan Williams from the Lending Alliance who seemed to work day and night seven days a week for my wife and I. In addition, Cheryl Buckley, a real estate agent, helped us through the process as our buyer's agent. She did a wonderful job.