First investment property - Deal Deep Dive!

[Scott Sherin]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $52,500
Cash invested: $75,000

My very first investment property I hope by doing my own "deal deep dive" I can spark the curiosity of others who visit my page who would like to share insight on this deal or anything else real estate related!

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

I had gained a good understanding of this market and this particular neighborhood. I was seeking a value-add deal that I could be all-in for under $100k. After developing my set criteria and diligently analyzing deals, I was able to find the one that worked for me.

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

By subscribing to Redfin alerts and practicing deal analysis, I was able to find a distressed property with some value-add opportunity. The real estate agent I used for this deal was a big resource for me, as she walked through the property in person to help me gather my information.In order for the returns to make sense for me, I knew that I wanted to be able to collect rent for 1% or more of my all-in cost. After estimating some rehab numbers, I was able to determine my maximum offer price.

How did you finance this deal?

This property was purchased with cash. I was able to present a business plan to a few family members in order to raise money for the purchase price, with intent to pay back their investment + interest once I am able to refinance. The rehab budget came from the money that I have managed to save up over the years.

How did you add value to the deal?

I was able to add value to the deal through renovation. I realized that the house was cosmetically outdated, and I knew that I would be able to force some equity in the home by modernizing the bathroom, kitchen, and add a few other things.

What was the outcome?

After completing renovations, this home was listed on the rental market. It will rent for $800/month and earn about a 6.5% COC ROI initially. After refinancing, I will still meet my criteria of >$100 cashflow and will increase my return to around 10%-11%.

Lessons learned? Challenges?

Persistence is an important factor when it comes to locating good deals. I analyzed hundreds of properties that did not work for me in order to find one that finally did. It seems the investors finding the best/most frequent deals are the ones willing to create systems and pipelines in order to look at as many potential deals as possible.

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

By taking some time to create relationships with agents, contractors, property managers, and other investors - I was able to lean on them to assist me in meeting my goal. Providing value and treating others with respect is a great way to develop and foster these relationships!