Raleigh Rental Breakthrough

[Pat Lulewicz]

Investment Info:

Single-family residence buy & hold investment in Raleigh.

Purchase price: $169,000
Cash invested: $42,500

4BR/4BA condo (private bathroom and walk-in closet for each bedroom) which is rented out by the room. Stabilized occupency with room to increase the rents slightly over time from current. HOA also allows mid-term rentals which would allow for higher rents for (ex) 6 month leases. Common area includes laundry, kitchen and living room. All utilities included in rent.

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

I was looking for properties in Raleigh for under $200,000, which are hard to come by, and these condo's met my criteria and the return that I look for in my investing.

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

Found the deal on the MLS and offered slightly above list which is ultimately where the property appraised at.

How did you finance this deal?

Due to the NOO concentration, this required a 25% downpayment, so used a mortgage originator to find a bank which would do the deal at the best rate possible. Unfortunately, could not find local banks which would keep the interest rate at a reasonable price due to the loan being non-warrantable.

How did you add value to the deal?

Tenants were 1-2 months from lease expiration, so was able to replace tenants at, or above, the prior rents. Fully stabilized in 3 months. In addition, updated the laundry appliances with energy-saving ones which helped my bottom line.

What was the outcome?

Currently fully-stabilized with no past-due rents. CapEx in laundry room, however no other large costs beyond standard maintenance. 11% annualized ROI.

Lessons learned? Challenges?

Going into the deal, I did not do ALL of my research on the leases/HOA. I did not realized that the HOA does not cover the water bill (which is what I was used to). In addition, I did not realized the tenants were not responsible for the utilities per their leases. Double whammy on my bottom line. Original ROI was at about 19%, however with the utilities, ROI drops to about 11%.

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

None of BP.