Real Estate Deal Analysis & Advice

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Jim Leboeuf
  • Cedar Rapids, IA
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1st investment Property!

Jim Leboeuf
  • Cedar Rapids, IA
Posted Aug 2 2019, 04:08

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $94,000
Cash invested: $23,000

This is a SFH that is older, but in a popular area of the city. Seller originally had it lister it $104k. We offered $90k and they came back at $94. We agreed as long as they provided $2k of the closing costs in that price. Accepted! We had people looking it a few days after I bought it and my property manager giving walk throughs and open houses even though we were in the middle of doing mainly cosmetic renovations. Within two weeks we had a renter placed. I ended up putting 20% down on the deal and all the updates and rehab will end up running me around $7k when all is said and done (a couple of items that have still yet to happen but are scheduled to be fixed). The best part is that the seller did not want to fix any of the items that came up on the inspection. Instead we negotiated they take care of 2k in closing costs, and then they wrote me a $4k check at closing for repairs. That kept an extra $4k in my pocket helping my COC at 17%+ and my cap rate at 9.5%.

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

SFH is where we wanted to start, and we found this in an area of town that is relatively popular, and in a solid school district. Basically, if everything fell apart for my family, we would be ok with living here while we got back on our feet.

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

Found it on the MLS.
Listed at $104. We offered $90. Agreed upon $94 with 2 k in closing costs.
After inspections it had several things that needed to be fixed. Mainly some older electrical stuff (house was built in 1880), a new concrete stoop, some shingle repair, concrete repair etc. The list was long and we showed the entire thing to the seller. They were not interested in fixing anything, so we asked for $4k at closing in the form of a check mad to me instead. They agreed.

How did you finance this deal?

Traditionally 30 year note. It is under our name right now, and we will deed it over to an LLC we just created here shortly.

How did you add value to the deal?

Mainly cosmetic stuff and a few items that will help with long term Capex (some roof fixes, added gutters to the property and had a couple of the basement windows blocked off and sealed to prevent future seepage). Cosmetics we replaced flooring, painted, replaced incorrectly installed 3 prong outlets with all GCFIs (no ground in older system).

What was the outcome?

Only about a month in, but this should cash flow at $350 a month, and that after holding back $85 for property management every month, and around $110 for repairs. We are thinking that repairs will be heavy in the first year as we discover things in this old home that the owner either did not repair, or tried to do themselves. We also set aside $10k for future Capex. Tenant is paying everything else and is responsible for year duties, so no costs there.

Lessons learned? Challenges?

Terms. The terms we negotiated I feel turned out pretty darn well. We felt good about price, but when we were able to get that extra $4k for repairs, that was a really good move. It took our COC from just under 15% to just under 18%.
However, now we are focused on how we get deals that we do not have to leave cash in and generating leads on our next deal. We will have a little over $23k in this deal, and with our capital that will run out quickly if we continue to do it that way. #BRRRR

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

Yes, I have an agent that helped do the deal, and our lender that we used to buy our own residential home.

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