More on buy and hold

[Greg Weik]

Investment Info:

Single-family residence buy & hold investment in Aurora.

Purchase price: $500,000
Cash invested: $125,000

This is not what most would seek out as a rental, but my experience owning a residential property management company has shown me that this type of house is actually the safest and most lucrative buy-and-hold type of property. Also, it's very liquid, as far as real estate goes. There are myriad reasons I'm drawn to high-end, expensive-ish single-family homes.

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

Appreciation and equity build-up. This home will appreciate steadily and likely with the same set of tenants. 5% appreciation annually of a $500,000 home means I make $25,000 in year 1, just by owning it. It cashflows and attracts the best kind of tenants - stable, higher income. By setting a minimum 700 credit score, we were assured good tenants.

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

Open market property, paid asking price. Found this deal after many months of searching for 3 car garage homes in this very specific area, at or under $500,000. This was and still is, the only home that meets the criteria. This, along with the upgrades made to the home, will ensure high desirability (and high rent) for many years to come.

How did you finance this deal?

$125,000 down, 30 year fixed.

How did you add value to the deal?

Replaced all the gold (hinges, doorknobs, etc.) with brushed nickel. Updated all light fixtures. Replaced original formica with granite. Installed pulls on cabinets. Replaced all appliances and converted electric range to gas. Improved landscaping.

What was the outcome?

This will be a solid rental to own for many years.

Lessons learned? Challenges?

Coming up with $125,000 cash to put down plus 6 months reserves for all properties is a challenge.

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

I own the top property management firm in Denver - Real Estate Solutions - and it's now managed there as well.