Hwy 1604 / Hwy 90 Buy and Hold

[John Wigglesworth]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $86,000
Cash invested: $14,000

My first investment and a good low risk start. 2/1/1 purchased from online auction. The rehab was all cosmetic but there was a lot of cleanup. Did a lot of the work myself and learned the value of paying someone else. I didn't lose any money busting up the driveway with a rented jackhammer, but I lost a lot of time and my contractor could have done it much much quicker. I rented to a Section 8 tenant, got a little extra in rent, and 90% of the rent is automatically deposited on the 1st each month. The tenant will be there a long time. However, I probably won't do Section 8 again.

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

I was able to go look at it with a realtor before the auction. I had a good idea of what I was getting.

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

I found it on Xome.com. It was an online auction. The downside is the bank can bid as well, and their bids are just to drive you up. I won the bid and then they said I didn't meet the reserve price. I had to negotiate a little thereafter. I came up a little, but not what the bank originally wanted. Never just lay down on their first offer.

How did you finance this deal?

Cash, then refinance.

How did you add value to the deal?

Paint throughout. Updated the appliances and fixtures. High quality brand new carpet for 2 bedrooms for $100 from a brand new build off Craigslist. Cement back patio. Replaced the back of the fence. The yard was just dirt so I put in sod and a lot of mulch. Mulch is cheaper and looks nice. Tenants aren't going to take care of nice grass, but this sod gave me what I wanted... a lot of attention with the photos.

What was the outcome?

I had about 30 visits to the house (another thing I won't do anymore). Rented in about 4 weeks.

Lessons learned? Challenges?

Read "Managing Rental Properties" by Heather and Brandon Turner. I made a number of mistakes screening, or not screening the tenant. I didn't know how to show the property and manage my time. I rented to a Section 8 tenant because she was very sympathetic, seemed real nice, and was convincing. She parked her car in the yard killing the lawn and has since snuck several animals into the house and continually lied about it. Rather than evict, we did an lease amendment and a $500 pet deposit.

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

Jose Zuniga with Texas Prestige Property Solutions.