Matt Irvine - Deal #1

[Matthew Irvine]

My first foray into REI was a SFR rental, BRRRR. To keep the flowery explanations to a minimum I will just segment the deal as the hosts do so wonderfully on the "Deal Deep Dive."

What: A Single Family Rental in Torrington, CT. 4 Bed, 2 Bath, and approx. 1600 Sqft. The property was owned by a flipper that had a family emergency requiring they sell the property prior to completion. Kitchen remodel, roof and flooring was completed, but there was no boiler or hot water heater, and some additional cosmetic work was needed for rent readiness.

How Did I Find It: I reached out to an agent about another home and he offered to show me several properties. At the end of viewing several multis he mentioned a pocket listing that could be a solid starter deal for someone who was able to buy with cash.

How Did I Negotiate: In hindsight, I overpaid for the property, at the time I think the right price was closer to 70k. In my excitement to get the deal done, I was willing to pay more. The Sellers wanted 85k, but knowing that the building lacked heat and hot water, no conventional financing helped me negotiate that lower. I offered 78k(cash) if they also replaced all of the windows in the house(12 windows).

How Did I Fund It: Purchase price was 78,000 funded from personal savings.

What Did I Do With It: After adding the needed mechanicals, painting and flooring, I was able to rent the property for $1,200 a month. After 2 years I refinanced at a value of $145,000 and pulled all of my capital out. The rental is still a part of my portfolio and currently rented at $1,400.

What did I learn: Lesson 1 - When buying from a distressed seller, be patient. This deal ended up being a strong BRRRR, but I could have saved quite a bit with some better negotiating.

Lesson 2 - Always get multiple quotes for repair work! 6 months in, I had a sewer line backup, I panicked and took the first person available(A Router company I won't name here). They told me the line was cracked and needed to be dug out and replaced(I now have a router guy that assures me this is a classic upsell tactic by this franchise) $5,000 later I now approach situations with a level head and make sure to vet the problem more fully.

Aside from some miscellaneous tenant management issues, this deal was a great start in building my confidence and anchoring my future investments.