Updated almost 5 years ago on . Most recent reply
First Home Turned Rental
Investment Info:
Townhouse buy & hold investment.
Purchase price: $118,000
Cash invested: $20,000
Our first primary residence that we turned into our first rental. Unfortunately it never positively cash flowed until the last few years and never enough to cover any type of CapX. The $185 positive cash flow is not accounting for vacancy, repairs, capX. The market is going up and we should be able to increase rent at the next turnover. We do have new tenants every year, or every other year do to it being a military town.
What made you interested in investing in this type of deal?
We bought this brand new construction townhome in 2010 while I was stationed at Camp Lejeune. At the time of the investment, rents in these homes were at $1200 a month while a mortgage only set us back $850. So it seemed like a great idea at the time. Live in the home while stationed there, then rent it when we leave. However, we didn't realize that almost immediately after purchasing, the market in J-Ville would spiral down. We were underwater for years. Actually, until about right now.
How did you find this deal and how did you negotiate it?
We were lead in this direction by a prior service Marine working as an agent. He sold us on the idea of "renting from the bank". Made all the sense in the world. No negotiating was done. My wife and I were 24 year old newly weds and had no idea what we were doing.
How did you finance this deal?
We used a VA loan. No money down, and a great first time home buyer tax credit. I'm estimating that we have about $20k invested in the property based on the amount we paid while living there ourselves. Since leaving Jacksonville, we were slowly losing money every month with low rents and repairs. Now we finally have a positive cash flow.... kind of.
How did you add value to the deal?
We added nothing of value to this deal, other than being alive and buying it.
What was the outcome?
The outcome hasn't come yet. We still own it.
Lessons learned? Challenges?
I will never buy brand new construction again unless I'm the one building it. I absolutely do not like HOA's and I will not buy anything attached to another home, unless I'm buying the entire building.
Most Popular Reply
Thank you for sharing your investment story! One advantage of being in the military is the secured payment, which allows you to be a little riskier with investments. I have seen this several times where service members will purchase properties; it breakeven cash flow. I am currently in the process of shifting my portfolio to a single market. I found it too time-consuming with properties in several states.
Sincerely,
Josh