Out-of-State Property of Firsts

[Jean Marx]

Investment Info:

Single-family residence buy & hold investment in North Little Rock.

Purchase price: $125,000
Cash invested: $25,000

This property encompassed quite a few firsts. We found the property through a realtor that does her own live in flips. It was our first short sale purchase, first out-of-state renovation, and first BRRR. The project wasn't without it's kinks, but we definitely learned a lot and got a solid start building a local team. The renovations were mostly cosmetic minus the removal of a loading bearing wall to open up the kitchen.

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

One of our primary strategies is creating cash-flow through BRRR buy and holds and landlord friendly states. We prefer small multi-family; however, this was a good base hit type opportunity to kick-off our long distance investing in a great elementary school district.

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

Through a local realtor that invests herself via live-in flips. The house had been on the market awhile. We came in with a serious offer that the bank didn't accept; however, they were willing to give us their bottom line. We got solid contractor quotes to confirm that the new numbers made sense and moved forward with the purchase.

How did you finance this deal?

We took a HELOC out on our primary residence and combined it with our savings to be able to submit competitive cash offers.

How did you add value to the deal?

We removed a load bearing wall to open up the kitchen, renovated the kitchen/hall bath, updated the downstairs/bathroom flooring, replaced the HVAC, changed out the light fixtures and outlets as well as painted the entire house. To stay within budget, we had to get creative. Instead of gutting the renovated rooms, we took approaches like resurfacing the hall bath from pink to white tile completely refreshing the area and adding trim the existing kitchen doors as a way to dress-up the look.

What was the outcome?

The updated property looks great! It rented within a week of completion during the corona pandemic due a good school district and having higher end finishes than anything else available. We did spend more on the renovation than anticipated after a $6.4k HVAC surprise but we were still able to hit the desired cash-flow mark. Being mid-COVID19 pandemic, the investment loan rates aren't ideal so we'll hold off refinancing until the dust settles. ARV 180k-200k based on our realtor's comps.

Lessons learned? Challenges?

(1) It's harder than you'd think to have contractors provide an itemized bid or even go out to do a bid at all. (2) Contingency funds are a must. We had a non-functioning HVAC that probably should have been caught during the inspection. That would have been stressful without some buffer. (3) A GC title doesn't mean they that's how they function. Talk to references. (4) It's weird paying/relying on other people for every simple task. (5) Organization is key.

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

Absolutely! We have so many vendors that we loved and a few that we'd skip. Reach out to me if you're in need of a realtor, painter, tile renewal pro, cleaner, lock-smith, handyman, or property management company.