Having Our First Home Pay for the Upgrades
Investment Info:
Small multi-family (2-4 units) fix & flip investment in South Setauket.
Purchase price: $325,000
Cash invested: $48,750
Purchased a single family fixer upper with the intent to convert it into a multi-family unit by re-zoning the property to include an accessory apartment for the duration of our occupancy. This allows us to utilize the income we receive from the rental unit as a way to provide the financing to make improvements to the property. Our goal is to sell the property approximately 5 years from purchase date and upgrade to a triplex. By taking this small step we have gained some knowledge in what it means to be a homeowner, "landlord," and a real estate investor.
What made you interested in investing in this type of deal?
We decided to purchase a single family and rezone to have our property help pay for its own fixing up. We took precedence from our families. I have family who love to fix and flip homes as a hobby. And for years my husband's family have utilized their property as a means to subsidize their income by renting out a part of their home as an accessory apartment.
How did you finance this deal?
We put 15% as a down payment and got a standard 30 year fixed rate mortgage.
What was the outcome?
Purchasing the property was the first and probably easiest phase. The second phase was to make the property code compliant. Next, we went through the efforts to find a tenant for the accessory apartment. Now we are putting in some site amenities such as a paver walkways, landscaping, adding new appliances, installing a whole house water filter, fixing the deck, upgrading the water heater, and saving for the kitchen renovation by using the money we receive from our rental.
Lessons learned? Challenges?
As first time homeowners and real estate investors we are happy we started with this property. It has allowed us to make the same mistakes other investors and "landlords" make without taking a financial loss.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
We had a wonderful real estate agent who has helped us through the purchase of the property and finding good tenants. So far we've done most of the permitting and renovations ourselves aside from hiring a local plumber to run piping and install the more complicated systems.