Investment Info:
Single-family residence buy & hold investment.
Purchase price: $77
Cash invested: $46,942
This property we aquired as a "Sub-To". The Seller had vacated the property. Then squaters helped themselves into the property along with some homeless that had an RV and tents all over the back yard. This property smelt extremely bad, had black mold and looked like it should have been condemned.
The Seller did love this property but she was 100% finished with it. When I realized the mortage was around $600/mth and the interest is 4.2% I asked if she would consider selling me her property sub to. She did not have the funds to fix the property and had already considered it gone.
Once we closed we cleard everything out of the house and back yard. Our GC wouldn't touch it until that was taken care of. Then we put $36K in the rehab. ARV was $180K back then and rented for $1200/mth = $600 cash flow! I was thinking, AWESOME! Cash flow over $400/mth is great!!! Renter were good for a while until the husband lost his job and COVID decided to come. They stopped paying rent in early 2021ish. We did not put quartz counter tops in but made everything really nice. WA has some crazy laws for tenants. If tenants know how to use the system it is very hard to get them evicted. Even with an amzing PM Company.
We finally got them out 6 days again. Property isn't in terrible condition but nothing like when they first got there. After reviewing our #s we are most likely going to fix what needs to be fixed and then put it on the market. We owe about $60k, rehab is about $25K and a conervative ARV for a 2 bd/1bth/636 sqft is $225K.
If our goals didn't change and only wanted SFH for a single family we would 100% keep it. Rent could be $1450/mth ($800 cash flow). But like I said, our goals have changed. By selling, we can use these funds for a bigger SFH that can be a shared housing/clean & sober living and cash flow a solid $2K/mth. Maybe we could even do a 1031 exchange. It's a win win either way!
What made you interested in investing in this type of deal?
We are attractive to houses that look like they need help. We like to bring them back to life and provide a home for someone who wants a home.
How did you find this deal and how did you negotiate it?
Drive for $ and was vacant. Build rapport. Listen to the Seller's wants/needs and provide if it's a win for them first and then us.
How did you finance this deal?
Cash
How did you add value to the deal?
We made sure the Seller understood everything and what our plans were with the property. House would have been an easy tear down and she didn't want that. The small town did not like the property. The property was a hang out for the homeless.
What was the outcome?
Seller's happy, not to mention her credit is way better now then it was in the past. The small town is happy. Because we bought it right and finally got the bad tenants out we will be able to sell for a great return to put on a bigger SFH with a much higer cash flow. If for some reason we don't sell... We know to have bigger requirements for a new tenant and the property will cash flow for a min. of $800/mth.
Lessons learned? Challenges?
Screening tenants! Luckly our other rental cash flows enough to pay for this mortgage. Learning the laws for tenants rights vs owners rights. There are professional people who know how to take avantage of the "system" and live off of it. I've learned that we must have higher requirements for tenants.
