My first rental property

[Jordan G.]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $222,000
Cash invested: $90,000
Sale price: $285,000

B-class duplex in A-class area brought up to A-class standards.

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

I had a strong interest in real estate, I previously fixed up a house from 1915 from the ground up. I have a desire to improve my financial future, so I made the leap of faith to make it happen.

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

This deal was on the MLS. At the time it was priced out pretty competitive to the neighborhood. I don't thinK I got the best deal on the house, however I could tell it had been updated and cared for from the previous landlord. I just wanted to find a situation I could make work.

How did you finance this deal?

From my first sale of my previous home, I netted about a 100k profit. I used half of that as my down payment (25%) for this investment, separate from my primary residence. The rest of the deal is financed on a conventional 15-year note.

How did you add value to the deal?

Downstairs: new hardwood flooring installed throughout, new paint throughout, old shower replaced with a Kohler Choregraph wall kit, new light fixtures, cleaned up existing bathroom, installed recessed lights in kitchen, new dishwasher, range, OTR micro in kitchen.

Upstairs: Cosmetically I inherited a pretty nice upstairs. The kitchen got a cheap makeover with new cabinets, sink, counters, stove, microwave, it changed everything. Installed a new stackable W/D upstairs also.

What was the outcome?

When I bought this house, I had gross rent of $1750.00 (for both sides) purchase price was 222k.

After doing a roughly 30k renovation, with most the work I did myself, I was able to take the rent up to market value, $2350.00/mo a 34% increase in rent price! This results in a $432/mo cash flow, on a 15 yr note AND paying a property manager!

In addition to that my ARV I'm guessing would be about 285k so I also bagged another 63k of equity, not considering what I put in.

Lessons learned? Challenges?

I think I got a good home, but I think if I waited and set higher standards I could have found a better deal. I wanted to find a manageable situation as I work full time and cant spend my life renovating. I learned that not all hardwood floors are refinish able. Also I plan to avoid buying another house with a bad shower. That is costly to fix and takes forever. I definitely think I could do this again.

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

I have a handful of people I will gladly share if someone messages me. Financers, Property manager, and the best realtor.