Second Property in my Portfolio

[Andrew B.]

Investment Info:

Single-family residence buy & hold investment in Cleveland.

Purchase price: $91,000
Cash invested: $20,175

3 bed 1 bath property on a street that is the border between a B and C neighborhood.

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

Spent most of the year looking for a solid BRRRR candidate but didn't end up finding one. Goal was to buy 3 units in 2020 and I needed one more so I focused on finding a good cash flow deal. Set an internal target of 8% NOI margin/cap rate and >$200 CF per month. It was also only 50% of the capital we've saved to invest in deals which made it a solid base hit of an acquisition.

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

Purchased from the MLS. I had a list of properties that had been on the MLS longer than 14 days (a rarity these days) and had my realtor email the listing agents for each of them to see if their buyer would be amenable to my lower offer. This one was listed at $99,900 and I offered $87,500 and purchased for $91,000 which was lower than my maximum of $93,000.

How did you finance this deal?

Purchased with conventional financing, 85% LTV.

How did you add value to the deal?

This was basically a turn-key house except for some minor cosmetic items. The biggest thing is that while it is on the edge of a B/C area, I made sure that the house was clean and in a condition that I would feel comfortable living in. Many of the people who came to view the property commented on how much nicer of a property I had compared to what else is on the market. The house doesn't have any fancy finishes or upgrades but it's in a condition I can be proud of offering to tenants.

What was the outcome?

Once I lowered rent, I was able to rent it out to a very qualified family. They were very excited to be accepted because the house is much nicer and cleaner than a lot of the offerings in the area.

Lessons learned? Challenges?

I set my initial rent at the higher end of the market range but realized that in this specific area, those that were able/willing to pay the higher range were applicants that did not meet my credit and income requirements which was not intuitive to me at first. Since this is more of a C class neighborhood, potential applicants willing to pay higher rents that have better credit and higher income were more likely to look at renting in nicer neighborhoods.

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

Gabbie Provencher is a wonderful realtor who knows the the west side and south side of Cleveland very well. She is a hustler and is very motivated to build her career.