My first Move-Up Rental Property I bought when I was 27!
Investment Info:
Condo buy & hold investment.
Purchase price: $165,000
Sale price: $221,000
This was my first property I bought when I was 27. I rehabbed and listed to sell right before Covid because I was always loosing 200-300 per month on average in cashflow. My biggest lesson is CONDO'S DONT CASHFLOW.
What made you interested in investing in this type of deal?
I was in new home sales at the time and I made large commission checks. I knew I needed a store of value for the money that was illiquid and knew I didn't want to blow the money I was making on things that would not appreciate. I thought investing in real estate made the most sense to me since it was the industry I was already in, and I was learning about it every day, all day.
How did you find this deal and how did you negotiate it?
My best friend just got her real estate license and so she represented me and helped me find it. It was an on market deal.
How did you finance this deal?
I did an 85/15/5 loan. That means I did a 85% LTV loan with the primary lender at 6.5% and a secondary loan of 15% LTV at a rate of 8.5% and I put down 5% of my own money plus closing costs. I did negotiate a $5,000 closing costs credit from the seller to pay for some of my down payment.
How did you add value to the deal?
I did a rehab before I sold it in 2020. That rehab cost me $12,853 and included changing the old bamboo flooring and changing to a click together laminate. Repainting, carpet at bedroom, changing out tile backsplash in master shower and tub surround, kitchen backsplash and utility room, changing out lights, door knobs, and punch list. The rehab took 1 month. When I do a rehab, I go and manage it onsite and walk it daily.
What was the outcome?
It sold quickly and for almost what I was asking. I listed it at $225,000 and got $221,000. Covid happened a month later. If I would would have waited to sell it to the following year in Feb 2021 or two years later in Feb 2022, I would have made $75,000 to $100,000 more. I was upset about that for a few years, but finally let it go when I started writing my book, Becoming an Elephant.
Lessons learned? Challenges?
If you are going to stay in the rental property business, my advise is to keep your rentals.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I am a real estate broker and listed my own property but always learn the same lesson. Even Realtors need realtors.