Primary Residence to first rental

[Eduardo Aguilar]

Investment Info:

Single-family residence buy & hold investment in Sacramento.

Purchase price: $145,000
Cash invested: $120,000

Purchased as a primary residence in 2012. Leveraged equity in the home to expand it from a 2x1 678 sqft to a 3x2 1008 sqft home. The remodel took place in 2015. This included adding 70 sqft to the kitchen, a second full bath and another bedroom. It also included shifting the garage as well as reroofing and upgrading the tankless water heater. We just purchased our second home and are renting the property for $2,200 with a net cashflow of $300 after mortgage and reserves.

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

We debated holding on to the home when we purchased our new home, but once we ran the numbers using the BiggerPockets calculator and we clarified our longer term investing goals, it made sense to keep it as a hold as its appreciated over $150K above our purchase and remodeling investment of $270K.

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

Given that we originally purchased it as a primary residence, we found it on the MLS and submitted a traditional offer with FHA financing.

How did you finance this deal?

FHA financing and a $10K gift from my wife's father for the downpayment and closing costs.

How did you add value to the deal?

We added over 300 sq ft and fully updated the kitchen, added a full bathroom and a third bedroom. We also addressed some of the major components including replacing the roof and upgrading the external tankless water heater.

What was the outcome?

The area that we're in has experienced some strong appreciation over the years and so this home has positioned us to have the option to keep it as a long term investment that we can leverage for our daughter's college or our family's future investments

Lessons learned? Challenges?

Get good at running the numbers. Even when we were mapping out our remodel, we ran the numbers to determine what the possible value could be for the home and kept our budget well under to ensure that we would retain a fair amount of equity even after the remodel

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

My agent for the purchase was my best friend and best man. He was great but still fairly new to the industry at the time. I have since secured my own license in 2018 and have helped over 30 families secure or sell their home.