Investment Info:
Single-family residence buy & hold investment in Madison.
Purchase price: $155,000
Cash invested: $75,000
Contributors:
John White
This was another first-time venture for me. Proud to say that it is completed and performing at this point.
This was a deal purchased in a solo 401k that used non-recourse financing. That was one of the biggest complications. I found the agent here on BiggerPockets and together we searched for a home in the Huntsville area. Madison is a nice suburb of Huntsville with excellent real estate prices and promising growth potential as the area continues to expand.
This listing was, while listed, somewhat of a pocket listing with the agent as well given he had a former buyer that backed out of the deal. The seller was ready to move on it and given the inspections, we were able to get it under contract less than list price. Just as we entered the deal, the pandemic reared it's ugly head. However, much to my surprise, there was relatively no impact to the progress of the deal and rehab as a result.
The house needed some light rehab to replace the flooring and paint the interior/exterior entirely. I also replaced all the blinds throughout. Given the rehab, we were actually able to rent it for more than what we had budgeted for.
An additional point about this property was that I was entirely remote through this endeavor. I've never personally seen the house. A key to this being successful was being able to work with a great agent in the area who was also a local investor. As such, he was also able to provide great recommendations for property management and in turn for rehab contractors in order to get the property performing.
I'm so grateful to have been able to accomplish this, and to have done it entirely remotely is the icing on the cake. A big thanks to the team included in this effort as well. The boots on the ground were critical to this being a success. Big thanks go out to them.
What made you interested in investing in this type of deal?
This was an interesting challenge because it was my first time buying a property from within my solo 401k. In doing so, I had to be very careful at how the ownership of the property was structured to make sure that I, personally, was not shown as an owner nor were any of my personal funds used. This property had to be entirely owned by my 401k as the entity... not me. Additionally, this was my first deal done entirely remote.
How did you find this deal and how did you negotiate it?
I found this deal after connecting with an agent/investor in the area. While the property was listed, it had just fallen out of contract with another buyer and my agent had first hand insight into the condition and story behind the sale. Leveraging the former buyer's experience, we were able to get this one under contract below listing right from the start and include agreement for the seller to address some repairs right from the get-go.
How did you finance this deal?
I had to use non-recourse commercial financing for this deal. This property was purchased from within my solo 401k and thus I, personally, could not have ownership of the property. Rather, my 401k needed to be shown as the owner. Additionally the debt had to be non-recourse since I, as a person, was not an owner, per se, of the property.
How did you add value to the deal?
The surfaces in the property were well used and thus had to be refreshed. My agent recommended a great property manager prior to closing and I got her involved early on to assess the repairs she felt would add value. She was able to get quotes lined up and upon closure we were able to pull the trigger to get contractors in to replace the flooring and paint the entire house inside and out. I also replaced all the blinds in the house.
What was the outcome?
My property manager was able to get it rented for $100/mn more than what we budgeted when I planned to buy the property after the facelift we did on the property. It was rented the first after closing with a one year lease signed.
Lessons learned? Challenges?
I learned so much about buying remotely and buying within a retirement account. This was truly a valuable experience given all that, fortunately, went right. Having learned the process now, I can hone it to tighten the numbers and streamline the efforts for all of us in the future. This was accomplished, too, during the Covid-19 pandemic. So despite the challenging conditions, everyone pulled through and made this a great success.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
I did. John White was my agent with his team. Carolyn Dietrich is my property/project manager. Both are actively involved in RE everyday and successful investors themselves. Their experience and established network were key to the success of this effort for sure. Big thanks to them and their respective teams.
