Single Family Cash Flows like an Apartment Building

3 Replies

Investment Info:

Single-family residence buy & hold investment in San Diego.

Purchase price: $965,000
Cash invested: $330,000

Lead the identification, acquisition, leasing, and management of a large single family house with many bedrooms in a desirable college neighborhood in San Diego, CA. Raised monthly rents by $1,000 within 12 months, creating $240,000 in value at a 5% capitalization rate. Investor partners funded the equity and brought in the debt.

What made you interested in investing in this type of deal?

Successful prior experience in the same market with similar assets managed.

How did you find this deal and how did you negotiate it?

MLS, seller had reduced price and we made a strong offer and were qualified, experienced buyers. As a Realtor myself, I set up auto-notifications when new properties come to market or change price in areas that I'm looking to buy.
Property needed some repairs so we asked for reductions before removing our inspection contingency.
Property was vacant upon closing so I negotiated a "leasing fee credit."

How did you finance this deal?

30-year fixed rate mortgage jumbo loan, 3.7% interest rate.

How did you add value to the deal?

Raised monthly rents by $1,000 within 12 months, creating $240,000 in value at a 5% capitalization rate. Capable, dedicated management and being in tune with the market. Replaced the sewer line, changed the roof, minor cosmetic upgrades.

I leased up the entire house before we even closed escrow! The lease started 4 days after closing!

What was the outcome?

Long term hold with great cash flow and amortizing debt. No plans to sell, yet. Have been more involved with landlords in the same community with similar assets.

Lessons learned? Challenges?

Knowing your market rents street by street is key. Being available for showings and responsive to all rental applicants, providing excellent customer service and a quality product will get you the business. Have systems in place for tenants. Screening tenants and setting expectations from the beginning saves time and money later on. Played almost every role in the transaction - Real estate agent, investor / principal, and property manager.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Chase bank for great rates but painful approval process. Shoutout to my investors.

Hey Ryan,

Sounds like a great deal. Congratulations!

You clearly worked hard and smart.

You say that this deal brought you closer to landlords in the same community with similar assets.

Are you thinking that the rapport with these individuals might ultimately lead to another profitable acquisition?

Originally posted by @Amy Heitner :

Hey Ryan,

Sounds like a great deal. Congratulations!

You clearly worked hard and smart.

You say that this deal brought you closer to landlords in the same community with similar assets.

Are you thinking that the rapport with these individuals might ultimately lead to another profitable acquisition?

Hey Amy, 

Thanks so much for your kind words. Yes, I believe engaging with landlords in the community may lead to future acquisitions. In fact, while recently screening new tenants for this same property, one of the property managers I called as a reference, was the property owner. She is liquidating her portfolio of five single family homes in this same market. Currently working with her to find a solution, whether it means me purchasing all the homes, listing it for her on the MLS, or finding another buyer off-market.

Almost exactly what you were suggesting has initially come to fruition.

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