College House in Duluth
Investment Info:
Single-family residence buy & hold investment in Duluth.
Purchase price: $102,000
Cash invested: $27,000
This was a single family house listed in Duluth, MN. It did not have a rental license and the family living it needed to sell. I was able to purchase the price for about 10,000 under asking. My first tenants were below market rent due to having to lease it up in January in Duluth (it is obnoxiously cold and icy that time of year). However once I was able to get it on the college leasing cycle and rent it out per bedroom, I took rents from $1245/month to $1600/month ($400/bedroom is a reasonable rate for college students in Duluth).
So I had to ride out some lower cashflowing months for the first year, but not it cash flows close to $500 a month and will only go up from there.
What made you interested in investing in this type of deal?
I knew this property, once converted to a rental, would be a high cash-flowing property due to its proximity to two colleges and being right on the bus line utilized by those students.
How did you find this deal and how did you negotiate it?
I found it on the MLS and was able to negotiate it down a little bit since the family had another place lined up to live.
How did you finance this deal?
Conventional financing through Republic Bank in Duluth.
How did you add value to the deal?
Mainly by licensing it as a college rental and renting it by the bedroom instead of as a single family rental. Once I was able to get it rented by the bedroom, my rents went from $1245/month to $1600/month.
What was the outcome?
I acquired a solid, cashflowing property at a good price in a promising location.
Lessons learned? Challenges?
Leasing a property in Duluth in January is not ideal. The property management company I worked with at the time charged me a bunch of money to get it "rent ready" even though the property really needed no work. This taught me to communicate expectations up front and not sit back and let things surprise you.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I worked with Jordan DeCaro as my agent, Kathryn Gunderson and Jason Crawford were my lenders from Republic Bank, and John Woodrich is my CPA. All were very helpful.