My first out of state investment purchase

[Shawn McCormick]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $36,000
Cash invested: $10,000

I bought this property from someone I knew growing up. The house had been vacant for over 3 years as the owner passed away. The house went to the owners father, nothing was done to the house, then the father passed away. My friend inherited the house but did not want it.

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

This is two fold, first of all, my market is very strong and finding properties that cash flow is pretty difficult. Since I like doing creative deals and not buying off MLS or via wholesalers, I was looking for something that I could purchase with low risk and cash flow. An opportunity came up out of State from a long time friend of mine who needed help. So with this deal, I got a creative financed deal with little out of pocket and also got to help a friend.

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

Basically through paying attention to my Facebook friends. I saw he had some family issues and I mentioned I may be able to help. It took well over a year, but when his life changed also and realized he could no longer maintain the home, he reached out for my help. I made 3 offers. Since there was no mortgage, a subject-to was not an option. So I offer all cash and another with some down and some monthly and another with more down and less per month. He chose the middle option.

How did you finance this deal?

For this one, I used all my own money. I had just sold a flip and made much more than I anticipated when I took it on, so I was actively looking for something to do with the money. I paid the seller $10k down, all closing costs and back taxes...under $15k all in. The rehab opened my eyes to more and more that I wanted to do to maximize the rent income, so I spent more than I budgeted, but will more than make up for it with low cap expenses and being able to refi at a higher rate should I want to

How did you add value to the deal?

I added value to the seller by him getting more for the house than he would have on the open market and not having to clean it up or compromise his health with al the stress of a sale. I then added value to myself by doing long term improvements to the home to make it a safe and reliable home to future tenants.

What was the outcome?

Currently (1/21) the rehabe is just finishing up so it should be rented soon.

Lessons learned? Challenges?

Investing out of state is a challenge in of itself, doing a 60% rehab when you don't have a team of people with knowledge really complicates things. I didn't have a title company that really understood what my needs were. ( I buy my houses in land trusts, and this one had a note). I also bought (tried to get it done much earlier, but seller had issues) at the end of October, going into winter in Northern Ohio, so much of the exterior items on my rehab have to wait until spring.

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

Not on this deal. I did find a property manager on Bigger Pockets, but have not finalized anything with them yet, so not ready to recommend at this time.