Second investment property, live in DIY renovation, REO purchase

[Rob King]

Investment Info:

Other buy & hold investment in Honolulu.

Purchase price: $316,000
Cash invested: $9,500

Foreclosure bought at auction through Hubzu which was a new experience for me. The property was in rough shape and the California bank that held the REO was terrible to work with but their lack of interest in the property worked to my advantage in the end.

2 bedroom, 1 bath condo in a middle income area. I knew the building through a coworker and had worked in several fail-safes into the purchase contract since I bid on the property sight unseen. The condo needed immediate work to make it liveable but it was largely cosmetic. Using a strategy I had developed on my first condo renovation I rented out one bedroom to a graduate student below market with the understanding that while she was living their the property would get better but her rent would not increase. This is a successful strategy when affordable housing is difficult to find esp if you have something that seperates you from the rest of the market (in this case the property allows pets).

Recently bought a second unit in the same building so this REO purchase is getting some final retouches and then will be on the market to rent by the end of Feb 2020.

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

After gaining confidence with my first property I was able to design a Buy and Hold strategy that worked for me and fit my market. I know the area and through a work connection I knew the building better than other bidders.

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

I found this deal using Hubzu and bid on the property.

How did you finance this deal?

Traditional 30yr fixed

How did you add value to the deal?

First I knew that the units included an on-site storage locker which was not referenced in the REOs paperwork though I was able to positively secure ownership through research and working closely with my agent. Immediately after moving in I removed an illegal modification, refinished the cabinets, installed new flooring, and painted the property.

What was the outcome?

The property was my primary residence until I located another unit, within the same building, that I wanted to purchase and will now rent this property. Finishing touches and updates are being completed with the rental to hit the market this month (Feb 2020)

Lessons learned? Challenges?

Learn the fine print of bidding on an REO and the fees associated with such activity. The deal was completed in October but the bank dragged its feet until January 3rd so that they could write it off as a loss for the following year.

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

My agent was fantastic, I had worked with her before and was very satisfied with how she handled this deal.