Investment Info:
Single-family residence buy & hold investment in Louisville.
Purchase price: $75,000
Cash invested: $15,000
Sale price: $125,000
My first deal, I was 21 and had no clue what I was doing (and was under the assumption you needed to put 20% down). The house was an outdated, but well kept one owner single family home. It was originally listed at $99,000 but had been on the market 226 days. They had dropped the price a few times and I ended up getting my closing costs and prepaids covered and and bought the home for $75,000. I then rented the property out (which I also didn't know how to do). My total payment with taxes and insurance was just under $500 and it was renting for $900 per month. The first tenant ruined the carpet but wasn't that bad, always paid (not always on time). Then I made a big mistake and put a friend in as my next tenant. In the beginning he paid and everything was great. After not hearing from him a for several days when rent was due I rode over. The front door was left open, the house was filthy, no power on, food rotting in the fridge, holes in walls, and tons of stuff lefts in the house and garage. I was able to rehab the property by doing mostly all the work myself from reserves I had set as from rent. The next and final tenant was not vetted well and I continued to ignore red flags. After 18 months of them living there and about 14 months of rented collected my rental house was basically in need of a full rehab. The good news is despite me not knowing what I was doing at all the numbers on the property had really worked. So even though I had to put approximately 8k and a lot of hard work into the property my tenants had paid me back about 2/3 of my down payment and paid for the rehab cost while paying the balance on the mortgage down to around 45k. When I put it on the market in the fall of 2018 the property sold for 125k in 4 days (with me covering 4k in closing costs). I learned a lot of lessons from this deal and from these tenants and somehow despite doing everything wrong it seemed like was still able to come out really well in the end. Moral of the story, if you don't know what you're doing (and maybe even if you do) get a property manager.
What made you interested in investing in this type of deal?
I had always been interested in real estate and had my eye on this neighborhood. I was completely clueless beyond that.
How did you find this deal and how did you negotiate it?
I got with a real estate agent and he suggested some homes in and around this area. The price had just been reduced and with a lot of inventory in that area I shot them fairly low expecting a counter, but they accepted it right away.
How did you finance this deal?
Conventional financing 20% down
How did you add value to the deal?
Despite letting the home get basically destroyed due to my poor property management I was able to do a lot of the rehab myself. My thought at the time was that to get top dollar for this outdated home everything is going to have to be re-done. So I wasn't overly concerned about what the tenants were doing to the property and rarely checked on it. Not a strategy I would employ now AT ALL, but I did basically all workout.
What was the outcome?
Home was pretty destroyed but despite that tenants paid the home down and I had enough in reserves to rehab the property and sell it for a nice profit.
Lessons learned? Challenges?
Poor tenants due to a lack of vetting and the problems were compounded by ignoring red flags.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I worked with an agent that was amazing that talked me into getting my real estate license. He's now my broker.
