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Updated over 4 years ago on . Most recent reply
Using a 1031 Exchange on a Buy & Hold Investment in Wilmington
Investment Info:
Townhouse fix & flip investment.
Purchase price: $136,000
Cash invested: $8,000
Sale price: $198,000
We purchased a townhouse in our neighborhood back in 2018 through FannieMae for $136,000 and after a few minor repairs put a tenant in there for $1,425 a month. The property appraised for $187,000 in July 2018.
We received an offer for $198,000 in August 2020 and close on the property a month later. We will be taking the profits and utilizing a 1031 exchange to invest in 2 rental properties.
What made you interested in investing in this type of deal?
This was our first rental property after doing a number of wholesale deals.
How did you find this deal and how did you negotiate it?
This deal was on and off the MLS for about a year from 2017 to 2018. After seeing a price drop I reached out again to the realtor to offer $133,000. We were able to come to an agreement at $136,000. A little more than we wanted to pay, but it worked out in the long run.
How did you finance this deal?
We used private money from a family friend for the purchase and did a rate & term refinance 4 months later to pay off our investor.
How did you add value to the deal?
My knowledge of the neighborhood and property in particular really helped in this deal. I had been following it and made the right offer as soon as I saw a price drop. I offered through the listing agent which may have created a little more incentive on his end to recommend my offer. We did a few minor things to get the property rent ready.
What was the outcome?
We had a cash flowing rental property for about 2 and a half years. We were able to make nice profit on nearly a no money down investment and will turn this initial investment into two rental properties.
Lessons learned? Challenges?
We learned a lot about property management and best practices for working with a tenant. Managing the property taught me to keep my cool when problems arise and know that there is always a solution.