First Single Family House Rental

[Joff Pedretti]

Investment Info:

Single-family residence buy & hold investment in Madison.

Purchase price: $210,000
Sale price: $290,000

The deal that got me started.

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

When I was in college most of the houses were all owned by the same 3-4 families. I knew they must've been making hand over fist. I never thought I would be in position to own a rental property, however, the combination of good savings habits along with a downturn in the housing market and it became reality. I got a great deal on this first investment and it changed my life.

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

Found on the MLS, and negotiated directly with the listing agent.

How did you finance this deal?

Conventional financing - 20% down.

How did you add value to the deal?

I increased the rent from $2000/mo to $2200/mo on the next rent cycle. After 2 years I refinanced.

What was the outcome?

I had an initial cash flow of $7000 in my first 12 months and was up to $11,000 by the time I sold. Another investor owned 1/2 the block and worked for a company that built high-rise apartments. My neighbor and I had the two nicest homes on the block so we held out for top dollar. He bought a lake home with this profits, I did a 1031 exchange and purchased two separate 2-unit buildings.

Lessons learned? Challenges?

If I did it over again I would've gone right into a 2-unit right away and financed with way less than 20% down. Overall this was still a great deal due to the purchase price.