1st Buy and Hold Investment Property

7 Replies

After 3 months of marketing I received a lead from one of my bandit signs.  The call came from the sellers boyfriend, stating that the seller's house was full of "bad memories" from a previous marriage and that she was motivated to sell. I got in my car and drove to her house and we spoke about how I could help her move to Florida by purchasing the house. She owned the home free and clear so her price point seemed flexible. I gave a ballpark offer of 115k as I started my due diligence. After a couple of walk throughs, I determined that the house would need all new flooring along with paint to make it rent ready. I asked if 106k was reasonable. The sellers boyfriend didnt think so and wanted a better price in return for putting the new floors down. I denied. After an altercation and a couple of tough conversations, she agreed on 106k. A week after the contract was signed, the seller called and tried to get out of the deal. I suspected that a better offer was submitted and she wanted to take it. I ran my contract through an attorney to double check its validity, since I had done all of the negotiation and forms myself. It was a 100% valid contract and they had no right to exit. Luckily, they had a change of heart and were pleasant to deal with leading up to closing. The boyfriend started smoking in the house a week before closing, but besides that... they didn't make any more trouble. Overall this was a great first experience for me. The property is only five years old and in a great location. 

I financed the property with a conventional 30 yr mortgage at a 5.75 interest rate, 20% down. This was an awesome time to come across the deal because my debt to income was still in good standing. Moving forward, I will have to get more creative with my financing. I was expecting 7k in repairs and improvements. After deciding that the flooring could handle a bit more abuse, that number became 4k. After some landscaping, carpet and paint, handyman work, professional cleaning, and photographs, it cost me 3.7k. The financials and yearly expenses:

Purchase Price: 106k

ARV: 146k

Financed: 84.8k

Down Payment: 21.2k

Improvement Costs: 3.7k

Mortgage: 495

Property Taxes: 910

Insurance: 1300

Property Management: 1535

Vacancy Rate (7%): 1050

Repairs: 450

CAPEX: 720

Cash Flow: 258 per month

Rent: 1250

Cash-On-Cash ROI: 12.29%

ROI: 16.61%

The appraisal came back at 146k. My plan is to use the property as a financing source for another property. A BRRRR is the train of thought, but instead of the refinance I will be going with a HELOC. The HELOC appraisal came back at 156k and I was approved for a 40.8k line of credit. I'll be closing on the HELOC next week and September 1st is when the tenants will move in.




Beautiful house with great entry price.. For clarity, if you cash out equity either via refinance or HELOC, what will you cash flow become? Not sure I understand this part of the BRRRR strategy - appreciate any feed back you can provide.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you