Deal Number 3: Buy and Hold
Investment Info:
Single-family residence buy & hold investment in Grand Rapids.
Purchase price: $145,000
Cash invested: $41,000
My wife and I closed on our 3rd rental property in December, 2020 after about 3 months of searching and offering on multiple properties in the Grand Rapids area. Despite the hot market, we were able to find a property that provides just over 9% cash-on-cash return, after accounting for future expenses and vacancies. We decided to use conventional financing due to the low interest rates, putting down 25% to get a 3.125% interest rate.
What made you interested in investing in this type of deal?
We have 2 other single family properties in our portfolio that have performed quite nicely. Single family properties continue to be extremely desirable to both renters and homeowners, providing cashflow while remaining relatively easy to offload if the need arises.
How did you find this deal and how did you negotiate it?
I found this deal after a previous offer had fallen through due to the buyer second-guessing himself. After running the numbers, I made a quick offer, and only asked for $2,000 in seller concessions to assist with the closing costs.
How did you finance this deal?
I utilized a conventional 30-year mortgage with 25% down.
How did you add value to the deal?
After closing, I replaced the roof prior to listing the property on the rental markets.
What was the outcome?
The property is scheduled for move in and will rent at a rate that provides approximately $360/mo of pure cash flow.
Lessons learned? Challenges?
The Grand Rapids rental market in the winter is significantly slower than the summer, adding to my initial vacancy expense to the tune of $50/day.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
My agent, Jake Thomas, continues to be responsive and is a valuable source of pocket listings and investor specific advice and experience.
