Long Term Buy and Hold

2 Replies

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chicago.

Purchase price: $28,000
Cash invested: $38,000

My brother and I purchased this property for $28k in 1985 directly from a family using owner financing. We paid interest only with a balloon payment due after 2 years. Then we totally gutted it and converted it to a two-flat, relying on our credit cards to finance the renovation. (that was back when credit card debt was still tax-deductible, and the interest was comparable to mortgage rates.) We covered the balloon payment by selling MCI stock, and getting an interim loan from the bank of Mom and Dad. Later, when the tax laws changed, and mortgage rates went down, we got a 15-year Bank mortgage to pay-off Mom and Dad, and the credit card balances. It's been paid-off for over 20 years, is cash flow positive, and the market value has appreciated substantially.

Being an absentee landlord created challenges for managing this historic, 160 year-old farmhouse, so I sold it. I was able to close the sale on 3/31/20 just as the COVID-19 restrictions were starting to hit. We had good cash flow and tax advantage over the years, and the appreciated cash-out should help weather this storm. However, I did sell to my brother-in-law's brother, so our nieces are still potential heirs.

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