You never know what will happen

[Mitchell Rivard]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $69,000
Cash invested: $20,000
Sale price: $309,000

Our family was growing and we needed more space. I wanted to buy a new house, but no banks were lending. My wife and I saved up 20% for a down payment on an investment property. We went to the open house, because the house was priced low enough that we could afford it. The realtor put us in contact with a lender that was lending and we could afford a more comfortable house than this.

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

We liked the price and neighborhood.

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

It was listed on the MLS. There was a sewer problem that they had a quote to repair for $5,000. We offered the bank to buy it as-is with cash for $5,0000 less than the $75,000 list price. They were also giving some closing cost credits.

How did you finance this deal?

When we first looked at it the house was a short sale and after we closed on our second home, it was bank owned. My mom had offered to use her HELOC to help us buy our second house. We hadn't used it, so we asked if we could use it to buy the house. She was good with the deal. We paid interest only until we had a two year landlord history and refinanced her out.

How did you add value to the deal?

We painted, refinished the hardwood floors, fixed the sewer and rented it out. Before selling it we renovated the kitchen and bathrooms.

What was the outcome?

The sewer was fixed for $1,000. We had three renters while we owned it. The first was terrible and didn't pay rent on time and was evicted. The second was a couple that moved into our second primary residence. When they upgraded, we rented in to a third family that we really loved. They took care of the house. We decided to sell it and use the equity for fun and future investments.

Lessons learned? Challenges?

Paint and texture can fix a lot of problems. It helps to know plumbers and professionals. Bad tenants don't get better. Holding real estate can make a great return.