Our First Deal - The Start of the Empire

[Brad Collins]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $129,000
Cash invested: $53,000

Contributors:
Julia Collins

SFH, 3 bed/2 bath, 1200 sqft, built in 1926.

Our first dive into the buy & hold rental world. A "light" fixer upper which wound up needing more than expected (as we should have expected). Lots of sweat equity went into this house to make the numbers "work", but that was the plan all along. In hind sight, it wasn't a screaming deal but it also wasn't a bad deal. A win for our first property!

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

As newbies, we gravitated towards SFHs in an area that we are familiar with. We knew we could bring some value in the form of sweat equity so a mid-level fixer-upper was on the priority list.

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

Walking the dogs in our neighborhood and noticed the For Sale sign and owners doing a little bit of landscaping. Started up a conversation and learned that they were now out of state and tired of managing the long distance rental. They gave us a tour an the snowball effect took over.

How did you finance this deal?

Conventional financing (25% down) for purchase and cash for the renovations.

How did you add value to the deal?

Put in a little sweat equity - remodeled the kitchen, master bath, and master bed rooms and fresh paint throughout. All new plumbing. Also gutted the overgrown backyard.

What was the outcome?

Unplanned expenses: Shoddy electrical. Flooding crawl space. General miscellaneous expenses (that added up fast).
Under/Over budget: Over by $5000 + future cost of crawl space repair (est. $5000)

Lessons learned? Challenges?

Don't skimp on due diligence. Better define the budget and add larger contingency. Get more creative with financing if we want to repeat the process more often. Don't pick the first house you stumble upon.