My First Investment Deal (without having any money!)

[Todd Clifton]

Investment Info:

Single-family residence buy & hold investment in Tulsa.

Purchase price: $46,000
Cash invested: $31,000

This property was my first. It was a 50/50 deal with a friend of mine. The former owners had done a reverse mortgage (ie HECM) on it so it was a deal with the bank and Fannie Mae/HUD. We were blessed to beat out all other offers with the perfect timing. We totally rehabbed the property doing the most of the work ourselves. Currently we are opting to keep the money in the deal and run about a 10% Cash on Cash ROI.

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

A single family property seemed to be the best way to begin investing. Personally I have never wanted to live in an apartment because I valued a yard and extra space with a garage. Also, so many people have pets now, so I knew single family homes offered a better option for people.

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

I had been on the lookout for several months for distressed properties. I got on a list or two of several realtors who would send me possible homes. But I also checked and used several property sites like Trulia and Realtor.com regularly to search for deals. And of course I wanted to see if I could find deals before they went on the MLS, so I wasn't afraid to knock on some doors.

This deal I found off a site. And because we acted fast we got it at the lowest asking price.

How did you finance this deal?

I found a long-time friend that I trusted who also had a love and a little prior experience in real estate. He had the MONEY and EXPERIENCE for the deal but I only had TIME and LABOR I could invest. So, we decided to team up.

How did you add value to the deal?

We rehabbed most of the house. New kitchen, bathrooms, interior and exterior paint, electrical, roof, restored hard wood floors and took out a wall for a more open concept in the kitchen/living room.

What was the outcome?

Currently we rent it out and are opting to keep the money in the deal and run about a 10% Cash on Cash ROI. We are unsure of the exact property value because we have not financed it and therefore have not ordered an appraisal, but we estimate the ARV is somewhere around $120K.

Lessons learned? Challenges?

The remodel seemed to drag on more than we had hoped. We both put a lot of sweat equity into it. But, I think we definitely learned how we could be more efficient on the rehab next time around.

Through this whole process, I began working on my real estate license because I saw the value of having a license and continuing to build an investment portfolio while helping others. Now that I have my real estate license, I am constantly learning and helping others everyday.