My first (seemingly successful) single-family rental

[Greg Houts]

Investment Info:

Single-family residence buy & hold investment in Newnan.

Purchase price: $180,000
Cash invested: $45,000

This was my first "real" rental property and was purchased while living out of the country. They say that the first property is often the hardest. Ironically, this one has been the easiest. Newnan is booming, so the 40% ARV appreciation is just icing on the cake! Once I finished the first deal, there was no turning back.

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

I've lived and worked a full-time IT job in Bermuda for the past seven years. I knew that there had to be a better way to invest in my future aside from trading time for money, paying insane taxes (even with a non-resident discount) and praying the stock market doesn't implode my 401(k) and IRA. I was an unintentional landlord in 2014, renting my Atlanta condo before moving to Bermuda. I grabbed the BP out-of-state (country) investing book and gave it a shot (as a proper business).

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

I was working with several wholesalers and agents trying to find something in the Atlanta area under $200k that didn't require a major rehab. After analyzing 15-20 properties, I discovered Newnan and found my agent through Zillow. She and her husband are both agents and investors, and she took my project on like it was her own. We stuck with MLS. This one came up, I did a FaceTime walk-though during a work conference lunch break, made a cash offer and held firm on price.

How did you finance this deal?

I bought the house all-cash and paid the initial rehab/repair in cash. Once I had a tenant in place and the deed "seasoned" for six months, I was able to refinance. Initial cash-out refi was done in 2019 with a 5/1 ARM through a portfolio lender (property was in a LLC). I recently refinanced into my personal name and locked in a fixed-rate 30-yr. It was scary to sink that much cash into a deal up-front. Cashing out the post-rehab equity, while having a cash-flowing asset, was a great feeling.

How did you add value to the deal?

The property had five grown men living in it before I bought it. None of them took care of the place and the interior was pretty horrifying (like a frat house for middle-aged men). It was an eyesore compared to the newer houses on the block, but it had great bones. I completely remodeled the interior, repainted the exterior and fixed up the yard so that it added value to the surrounding houses. The ARV immediately increased neighboring property values.

What was the outcome?

I've since rented it out to young families, helping build their credit as they save(d) for their own houses. I'm a responsible and caring landlord, which has seemingly paid off.

Lessons learned? Challenges?

Long-distance investing can be done but it's not without challenges. The house was in worse condition than the initial FaceTime call indicated, so the rehab budget increased. I've also had to replace the hot water heater and HVAC with tenants in-place. Given the age of the original units, I should have budgeted these capex repairs up-front and immediately taken the depreciation. Another mistake was initially financing within the LLC and paying closing costs twice to lock in a fixed rate.

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

Yes. Katherine Wible in Newnan, GA, is one of the best agents that I have ever worked with. She put me in touch with her contractor network, which has been invaluable when managing this house from a different country.