Investment Info:
Single-family residence other investment.
Purchase price: $6,000
Cash invested: $9,500
Sale price: $97,000
Simply a buy (via a down payment and promissory note at $500 per month payment to the previous owner), hold with no rehab investment and sell approximately 18 months later. Property is located in the Detroit historic Boston Edison District. In all honesty, I didn’t have the funding at the time in order to perform the rehab that I initially intended to conduct....but I was very fortunate to have the market perform well and to find a cash buyer (almost immediately upon listing).
What made you interested in investing in this type of deal?
Great neighborhood in the city of Detroit that has amazing properties with unbelievable architecture and character. I was also introduced to this opportunity by a close, childhood friend who was much more experienced than I in the real estate markets.
How did you find this deal and how did you negotiate it?
This was introduced to me by a close, childhood friend who (at the time) had a number of other projects on his plate and didn’t have the capacity or desire to take on another. I was fairly new to the real estate investment market and had informed him, and others, that I was “in the market and looking for deals”.
How did you finance this deal?
The deal was financed by an initial $6,000 payment to the owner who lived in Atlanta & also invested in Detroit properties. The owner wanted to unload this property & my childhood friend had a relationship with her. I paid the $6K and signed a land contract with the $25K balance due in full within 18 mths - payments at $500 a month. The goal was to find financing, conduct the rehab, refinance and take on a mortgage after the rehab & payoff the previous note owed.
How did you add value to the deal?
I wish I could say I did....but I only performed interior and exterior cleanup to ensure the property wasn’t an eye-sore on the neighborhood....but that was all.
What was the outcome?
Sold the property to another investor out of Arizona for $97K. I was of course able to pay off the land contract balance of $21K and walk away with over $60K in 18 months or so. My total out-of-pocket expense was $15,500 over 18 months.
Lessons learned? Challenges?
Relationships, relationships and relationships are key! I also learned the importance of letting people know what you want and aspire to do...be vocal, speak about it, be your own best commercial.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I worked with my good friend who was the real estate agent on the deal as well as a mentor I connected with who has over 30 years of experience in the real estate market here in Detroit. They were both extremely helpful in helping me understand dynamics that need to go into rehabilitation of property. Even though I never conducted the rehab, I went through multiple exercises, conversations with contractors, etc because it was my intent from the beginning.
