1927 Plaster and Lath Newlywed House

[Lia Risk]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $69,000
Cash invested: $10,000

This was our first home after getting married. We couldn't sell the property without being upside down on the mortgage, so we turned it into a rental property in 2011 when we had to move out of state. Even though there's no monthly cash flow, rent covers the mortgage, management fees, and repairs. Hoping to someday make lemonade out of this situation!

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

Honestly, this wasn't a deal. After getting married, we wanted our own place and hastily paid full price for something that was mostly an emotional purchase.

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

We found this deal driving through neighborhoods in our town. My brother was our real estate agent, so he waived his commission during the sale, and really the only thing we negotiated was for the seller to pay closing costs if we offered full price.

How did you finance this deal?

FHA Loan with 3% down. There was a tax incentive that year for those purchasing homes in 2008. We learned later that we had to pay back that back in yearly installments.

How did you add value to the deal?

Waterproofed the basement and remodeled the kitchen. Replaced bathroom floor, restored original hardwood floors. Updated electrical panel and furnace.

What was the outcome?

Due to continued depreciation in the neighborhood, we continue to pay down the principal on the mortgage at a similar rate to the depreciation on the home value. We've been renting it out until home values stabilize in the neighborhood.

Lessons learned? Challenges?

Where to begin?! Haha. Don't make an emotional purchase. Really investigate the trends in home values in a neighborhood before purchasing. If there's a downward trend, or lots of foreclosures, consider what both the immediate return on investment and the long-term roi would be - do homes in the area rent easily? Make sure you're not investing more on remodels than what the home value can support.