Investment Info:
Single-family residence buy & hold investment.
Purchase price: $160,000
Cash invested: $30,000
I purchased this 3BR/1.1BA SFH at a deep discount at $160,000, putting $10,000 down and investing $30,000 to rehab the property. The value of the property is $286,000.
What made you interested in investing in this type of deal?
I have always been interested in buy and hold and this happened to come across my path.
How did you find this deal and how did you negotiate it?
There was a single woman with a child living in the home and over the years it had become somewhat neglected. This woman ended up marrying a friend of mine who had two kids of his own. So this relatively small (1,285 sq. ft.) house now had 5 people living in it. My friend was unable to do the fixes due to the amount of traffic in the home. He originally wanted $180,000 but I was able to get him down to $160,000.
How did you finance this deal?
At the time I had my own company where I would act as a construction property manager for various clients but work was pretty slow. I somehow managed to qualify for a conventional loan but had to put some money into escrow to fix the front stairs. Since I had very little money coming into my household I decided to take money out of my ROTH IRA account to pay for the rehabilitation.
How did you add value to the deal?
I was able to buy low, put minimal amount of rehab work into it and increased the value by over $100,00.
What was the outcome?
It was an incredible deal. Although the cash flow isn't the greatest at about $250/mo., I had done it for valuation purposes. All in I am at $200,000 but it is worth $286,000 and climbing. I was able to get someone to do a 2-year lease. Best yet the family that rented from me works for a national window company and installed new windows for me (free of charge). I plan on raising the rent after the 2 year lease to $2,200 and refinance the house at $200,000, thereby pulling my rehab money out.
Lessons learned? Challenges?
The biggest challenge was finding money to rehab the property. I had very little income at the time and was surprised that I even qualified for the mortgage. Thanks to podcasts like BiggerPockets I was able to figure out that I could take money out of my retirement account to pay for it.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
No.
