Our First Rental Property

[Salvatore Cataldo]

Investment Info:

Single-family residence buy & hold investment in Ocoee.

Purchase price: $175,000
Cash invested: $5,000

Purchased 3/2 SFR for $165k cash in December 2020.
Value add (15k budget): Cosmetic interior repairs (drywall, paint, cleaned roof algae, added curb appeal), replaced plumbing (entire house), and updated electric meter & panel.
Appraised in June 2021 for $220k. Cash-out refinance for 80% LTV of $175k.
Home has been rented since January for $1500/mo.

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

Owning & Operating Construction Unlimited, I understood my ability to retire hinged on a source of passive income. Before finding Bigger Pockets, I didn't know anything about the BRRRR strategy. I just knew I had generated some savings that I needed to put to work, because it wasn't doing me any good in the bank. A SFR seemed like the logical first step.

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

I found the deal via an auto generated email from my agent/broker for specific search criteria on the MLS. I received the email the second this property hit the market around 4pm. I went and looked at it by 5:30pm and had it under contract at 6pm. Luckily, the seller was home when I arrived to do my inspection, because during a quick conversation I understood their motivation to sell. They lost their job due to COVID and were looking to access their equity before Christmas.

How did you finance this deal?

Understanding their motivation, I paid full asking price with cash guaranteeing to close before Christmas.

How did you add value to the deal?

Cosmetic interior repairs (drywall, paint, cleaned roof algae, added curb appeal), replaced plumbing (entire house), and updated electric meter & panel.

What was the outcome?

In June 2021 it appraised for $220k.
Cash-out refinance for 80% LTV of $175k.
Home has been rented since January for $1500/mo.
After refinance, the property will generate $300 in cash flow.

Lessons learned? Challenges?

I originally purchased the property under a corporation thinking I needed to minimize liability. Discovered how hard it is to obtain financing for SFRs understand corporation when I went for the cash-out refinance. Had to sell the home to my wife and I personally because the entity wasn't a LLC (making transferring of an asset much easier).

I learned it’s better to purchase residential real estate I intend to hold personally and use insurance to minimize exposure.

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

Pat Hancock
Thomas Lynne Realty Group