Investment Info:
Single-family residence buy & hold investment.
Purchase price: $265,000
Cash invested: $30,000
Contributors:
Jonathan Timberlake
A small 2br/1ba home in a quaint East Nashville neighborhood turned from a perfect starter home for us to a consistent stream of solid cashflow along with substantial appreciation in value.
What made you interested in investing in this type of deal?
We originally bought this home in May of 2019 as our starter home to live in. After two and a half years of living there, we've moved into a new primary residence and converted this property into a long-term rental. It's been a long-term plan of ours (in addition to other deals) to "stair-step" our way into multiple properties by purchasing a new primary residence every couple of years while holding onto the former properties to convert into long-term rentals.
How did you find this deal and how did you negotiate it?
As first-time homebuyers, we were simply searching the MLS for something in our budget and livable. This was a fairly straight-forward negotiation (we didn't know how easy we had it to buy in 2019!) - the house had been on the market for a few weeks and wasn't a competitive buying situation by any means.
How did you finance this deal?
Fortunately, we originally bought this deal as a primary residence, so we went with a conventional 30-year loan with 10% down. We refinanced to another conventional 30-year loan in the Fall of 2020 while it was still functioning as our primary residence in order to get our monthly payment super low (we dropped PMI, lowered our interest rate, and re-amortized the lower loan amount over a new 30-year term).
How did you add value to the deal?
We made some minor aesthetic changes to the home and fixed the place up a bit, but by far the biggest factor that has affected the value of this home has been time, location, and remarkable appreciation. Three years into owning this home in a super desirable neighborhood has led the value to soar. At this juncture, we could easily sell this home for at least $400,000.
Lessons learned? Challenges?
Having had this internal/mental plan to buy real estate, hold onto it, and let it cashflow/appreciate has always made perfect sense to us, but to see this internal thinking become an external reality is the ultimate confirmation that this works. If anything, we've learned to be a bit less hesitant and we're stoked to take our next steps towards more properties!
