Our Second Home is a home run but it didn't start that way!

[Jose Tamayo Jr]

Investment Info:

Single-family residence buy & hold investment in Simi Valley.

Purchase price: $535,000
Cash invested: $85,000

We Sold a mobile home that we purchased for $74,000 back in 2014. We remodeled while living in it. Sold it in December of 2019 for $158,000.

We purchased our current house while we had our mobile home for sale. So we had two mortgages for 6 months.

Purchased This home that had an attached 600 sq ft 1 bedroom Granny flat with its own side entrance. The house Had 5 bedrooms 2.5 baths.
We completely remodeled the main home to house hack (added value). We converted the 1/2 bath to a full bath.
We currently live in the main house (4 bed - 2 bath) and rent out the addition for $1,450 a month.
When we purchased we put 5% down and our mortgage was at $3,400 +/-
Just refinanced at a lower interest rate in April 2020 and removed PMI because we added about $120,000 in value.
Our current mortgage is $2,800 +/-

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

The potential cash flow after we renovated and rented out the back unit.

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

Found the Deal with realtor friend that we asked them to send us any house any condition with addition and separate entrance or potential to have rental income. After about 6 months of looking, we found this old house and its asking price was $565,900 we offered $530,000 and we negotiated to purchase at $540,000. We then did our inspections and managed to get $5,000 back in seller credits for an electrical upgrade.

How did you finance this deal?

5% Downpayment: Savings account
Escrow: Savings account
Mortgage: Conventional financing with PMI
Partial Rehab: Credit cards
Partial Rehab: Hard money Lenders (friends and family)
Refinance: Money from the rental income

How did you add value to the deal?

* new electrical
* new plumbing
* new drainage
* relocated furnace in the attic to get more usable sq ft
* new kitchen
* new vaulted ceilings
* converted 1/2 bath to full bath
* remodeled floor plan for open concept and better flow
* larger master bathroom to have jack & jill
* new restrooms

What was the outcome?

When we refinanced the house appraised at our 80/20 loan to value so we removed PMI and got a lower interest rate.
More money in our pocket

Lessons learned? Challenges?

Get a contractor or get a team of subs in our payroll...
It always takes longer than you anticipated.
Try to purchase from a Wholesaler next time.

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

Yes, I would definitely recommend my team of professionals.
Send me a message if you need their information.