Introduction into property management with cheap SFR
Investment Info:
Single-family residence buy & hold investment.
Purchase price: $20,000
Cash invested: $12,000
I'm gonna pay this house completely off and turn this one into a line of credit and will be practicing the concept of 'Velocity Banking'. Finding a proper licensed contractor would've blown my budget. I took the risk with an unlicensed uninsured handyman and had him sign a Certificate of Non-Coverage combined with adequate home insurance and it worked! His low quote warranted a large down payment and since he was referred by my mentor, he was trustworthy.
What made you interested in investing in this type of deal?
The condition of the property, desirable layout and location. Aside from old pipes, the location was in a bad neighborhood (cheap) but it was on the outskirts with no neighbors but an old couple. I interviewed the couple and decided it was a good buy from their info. The house is adjacent to an empty commercial lot and main intersection which is a potential for a future buyout and now see businesses are starting to setup shop in this area, the neighborhood won a budget initiative recently.
How did you find this deal and how did you negotiate it?
Zillow, I tried to negotiate a price in for repairs but the owners wouldn't budge. I felt it was still worth it, the ARV was 41k while listed for 20k.
How did you finance this deal?
Used cash as collateral in commercial loan which converted into a mortgage as part of the deal. An odd product, I'll go a different route next time to avoid finance charges on the conversion.
How did you add value to the deal?
Requested vinyl flooring to cover the bare concrete in the 2nd Livingroom, used modernized fixtures and added closet to qualify extra room as 3rd room on paper. Original fireplace was removed with prior owners, leaving wood floor in its place, so we covered with vinyl flooring and added electronic fireplace.
What was the outcome?
I'm using Avail.co to manage this rental and create the contract which borrows important clauses from Oklahoma Real Estate Commission contracts. As soon as I listed the home on Zillow, I got a flood of demand for rent and could only handle a few days of listing. It's now rented to a highly qualified couple, they even pre-paid for next month. I'll be ready for the next BRRRR soon, this only took so long because I'm inexperienced with property management and didn't know any contractors.
Lessons learned? Challenges?
Price-in for replacement pipes on offers in this market, finance with as little steps as possible to avoid finance charges. After hearing fellow investors seeing huge demand for rentals I became a believer after previously being very skeptical with this town. Listen to wisdom from experienced people. You can give the little guy a chance but with plenty of safeguards and generous exit plan. During the rehab, pipes leaked and had a well-known plumbing company came out 3 times for fixes.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Contractor - Terrance Harris
Plumber - Andy's Plumbing
Realtor - Nita Rodriguez/Remax