Deal Diary: An On-The-Market Win

4 Replies

When I first moved to Havelock, NC, I was eager to get my feet wet with my first investment property, after purchasing my primary residence. It was April, and I had remembered seeing a quaint, 830 sqft, 2bd/1bth townhome, while house hunting back in February. My real estate agent had told me that I was the only person to see the house, because the tenants only allowed showings on Tuesdays, every other week, from 11am to 1pm... I figured that with the "unfair advantage" I might as well make an offer. I had started low. The numbers would not have worked with any offer over $29,000. It was listed at $49,900. After a back and forth, the seller and I stalled out at $41,000. I was bummed, but started looking into off-market leads. At this time I found an awesome 1335 sqft, 3bd/2bth SFH, in a great location, that I have written about here. It was now the end of July, and my business partner and I were looking for a property. I had recently listened to a BP podcast that had mentioned a great tidbit on negotiating MLS deals. Brandon Turner had mentioned, that when a negotiation had stalled and the seller and he went their separate ways, he would make an offer again, several months later, if the property was still listed. I called my real estate agent and did just that. I re-offered at $28,500 and, after a brief back and forth, I was able to get the property under contract for that amount. Twenty days later, I was at the closing table, as we purchased it with all cash.

The same tenants that had made the property inaccessible were the ones we inherited. Although they were not at all abrasive during the purchase, we have decided to keep a close eye on their behavior as tenants. We are currently conducting turnover of the property management and stabilizing the investment. 

Financing for follow-on properties was a big deciding factor in purchasing the property with all cash. We will either refinance or open a HELOC to facilitate future deals. The cash flow will be subject to change because of the plans to tap into equity, but our criteria for performance will still be met.

I really enjoyed this deal from start to finish. The property was pretty much turn key ready, discounted, and my agent did much of the leg work. I wish it was always that easy! Additionally, it was an epic moment using the knowledge of an iconic BP figure, like Brandon, to jump start a negotiation back up and ultimately close on a deal. It just makes me more eager to learn and get after it!

The numbers:

Purchase Price: $28,500

Equity: $49,000 (No Appaisal) Comparables are 45k and 53k

Financed: $0

Improvement Costs: Projected $2,500 on tenant turnover

Property Taxes: $700

Insurance: $900 yr

Property Management: $58.33 monthly

Vacancy Rate (7%): $42 monthly

Repairs: $360 yr

HOA: $420 yr

CAPEX: $144 yr

Misc/Legal: $349 yr

Cash Flow:  $204 monthly 

Rent: $600

Cash-On-Cash ROI: 9%

Shoot me a pm or leave a comment if you have any questions or remarks! Thank you for reading!

-Paddy

Miscellaneous expenses act as the "catch all". This includes aiding an insufficient CAPEX fund. Our big ticket items in the property are in good shape. Perhaps we need to plan a larger budget for the CAPEX, just to be conservative. Thank you for that observation @Caleb Heimsoth

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