First buy-and-hold single family rental

[Annchen Knodt]

Investment Info:

Single-family residence buy & hold investment in Burlington, NC.

Purchase price: $61,000
Cash invested: $24,000

Contributors:
Tom Knodt

First buy-and-hold single family rental (of hopefully many!)

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

I am looking to build a portfolio of cash-flowing properties to achieve financial freedom. My agent / property manager convinced me that Burlington is a good nearby place for cash-flow - I live in Durham which has become more of an appreciation market.

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

Found on MLS with the help of my agent, initially offered asking price ($64k). Asked for a $4k concession after inspection turned up a few sizable unforeseen issues, sellers granted a concession of $3702.50 (?!)

How did you finance this deal?

Cash with partners (/parents :-)

Initially applied for delayed financing, but fell through since the funds used to purchase were from a partnership, and I applied for the loan in my individual name (with plans to ultimately deed the property to our partnership's LLC). Lesson learned! Waited the 6 month seasoning period to do a standard cash-out refi instead. House appraised at $82k, loan is 75% LTV, 4.25% over 30 years.

How did you add value to the deal?

Did $19k of rehab work - probably more than we should have! Got a crazy story out of it though… through some sort of miscommunication, the roofing sub-contractor replaced the roof on the wrong house! At least it was a small house…

What was the outcome?

Renting for $950/mo (+pet rent)

End result is ~$200/mo cash flow for ~10% CoC return on the ~$24k left in the property
(nb: I've wondered what the "Cash invested" field in this form is intended to refer to, I think folks interpret it differently. I'm assuming that it means the ultimate amount of cash you're investing, not e.g. rehab etc expenses above purchase price)

Lessons learned? Challenges?

Learned I need to get better at estimating rehab costs and understanding where is the best place to spend $$ for rental value. Learned that purchasing a house can be very stressful and it's easy to feel like everything is going to go terribly wrong, so very important to be confident that your numbers and strategy are well-founded, and let that drive you more than your emotions!

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

Yes! Jesse Marinez (One Village Property Management) - his enthusiasm is contagious!