Sandra Terrace Buy and Hold Turned FLIP!

[Cara Lonsdale]

Investment Info:

Single-family residence buy & hold investment in Phoenix.

Purchase price: $63,000
Cash invested: $14,000
Sale price: $238,500

This was originally a buy and hold. We picked this one up with the intent to hold as a rental. At the time, rental rates were about $995. We purchased for $63K, and put $9K into it initially (lipstick on a pig), which included putting up a couple of walls and double doors to create a den in the back of the house, which gave us a 2 bedroom + Den instead of just a 2 bedroom. We also painted, swapped out hardware and fixtures throughout. We installed a completely new backyard landscape including lush grass, and new appliances in the kitchen. We also resurfaced the kitchen counter with a paint kit from Home Depot.
We held the rental for 7+ years, increasing the rents over the years to our final Tenant who paid $1,395.
Over the years, the home warranty replaced the HVAC for us with little contribution on our part (yes, home warranties are good if you have the right one). We also replaced the windows throughout with dual pane.
When we decided to sell, we had it painted inside and out again, and had the kitchen and bath counter tops, and bathtub/showers refinished. We replaced a few lights to update it a little bit as well.

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

Cheaper acquisition price. Ability to do a less expensive rehab to make it suitable to rent long term. Rental rates were also favorable and provided good cash flow.

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

This was on MLS.

How did you finance this deal?

We obtained a regular conventional loan with 25% down. No mortgage insurance. We later refinanced it to cash out some equity and purchase another project. The rental rate from this project covered the mortgage payment for both projects!

How did you add value to the deal?

New HVAC (covered by home warranty), new roof, painted inside and out, new windows, refinished bathtub/showers, kitchen counters and bath counters. New backyard landscaping with lush lawn.

What was the outcome?

We held for over 7 years, and just sold for $238,500.

Lessons learned? Challenges?

Always set "triggers" for your projects. When a trigger is set off, always sit down and evaluate your project to make sure it still makes sense. This property was a great cash flowing property for us. However, the equity was more valuable in a different project, and ultimately we decided to sell and cash out the remaining equity for the next deal.

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

I am a licensed Realtor. So, I listed it in MLS and managed the online marketing campaign myself.