First Investment Property

[Kris Gerhardt]

Investment Info:

Single-family residence buy & hold investment in Spokane.

Purchase price: $95,000
Cash invested: $138,000

This was my first run at "out of state" investing as the Seattle area is not conducive to buy and hold assets. I bought this property off market for cash. Overimproved the property a little but used materials that should hold up for years. Property has been occupied since it first hit the market in March 2020. This property gave me the confidence to invest anywhere in the country.

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

Looking for long term cash flow with the ultimate goal of having the option to "retire" from my W2 job in the next 10 years. This is just the first step towards that goal.

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

I was connected with an agent who heard of this deal in his firm. I made an initial offer that I felt would give me plenty of room to keep the total cost below 75% of ARV. They countered at a very reasonable price and I took it.

How did you finance this deal?

Cash

How did you add value to the deal?

I overimproved this property a bit and spent WAY more on the renovation than I had originally intended but the upgrades all added value and should hold up long term, reducing replacement expenses over time.

What was the outcome?

The property was rented just as everything was shutting down due to COVID at a slightly reduced rate from what I thought was the going market rate in the area but I was ready to panic due to the shutdowns and my property manager was the voice of reason. It rented a couple weeks later at $1150 vs the original rate of $1195.

Lessons learned? Challenges?

Relationships and communication are EVERYTHING. I had a really eager agent who was willing to learn and actually use an excel tool that I had created to analyze deals. Once he heard of a deal that fit the criteria making an offer that fit my parameters was easy. I was introduced to a great contractor who had an investment property and understood my vision for rental housing. He made great recommendations and completed the project ahead of schedule.

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

Absolutely. I need to check with them before throwing names out here but my biggest surprise was that in talking with Mountain West Bank about financing they offered me an HELOC at 75% of the purchase price without any seasoning period. At the time the rate was below prime so I still have it. You can't really beat financing at 2.6%. I tried to extend the line after the seasoning period and they wouldn't do it so I will need to look to stack a cash out refi on it when I need the funds.