All Forum Posts by: Sarah Cook

Investment Info:

Single-family residence buy & hold investment in Graham.

Purchase price: $49,000
Cash invested: $2,450

Strategy: Own to Rent, Long Term Hold - Purchased 1st home w/intention of occupying 1+yr then turning into rental. I had no idea what I was doing. No idea what expenses might be, rent comps, if it would cash flow. All I knew is that I could easily afford the payments on my own, it was noticeably cheaper than equivalent size apt & no restrictions on my large breed dog. Plus my boyfriend could move in & cover 1/2 cost. Not as good as having house-hack roommates pay everything but affordable.

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

My primary desire was financial stability, time freedom & location independence. I came across the books Your Money or Your Life, and Voluntary Simplicity in my early 20's, then Rich Dad Poor Dad giving me a framework to think about the money side of creating the life I desired. This was the easiest foot in the door, buying as an occupant & paying only 5% down. Slow renovating while living there and finding a good tenant. Then repeat.

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

This deal was a fluke. After a weekend of unsuccessful house hunting, my agent sheepishly mentioned he had a listing that just fell out of contract. He figured I wouldn't want it (different neighborhood and lower price point) but offered to show it on our way out of town. It was instantly recognized as an opportunity. This was exactly how I (+ newish partner) could move to a new state, get established, and have time to find the next home at our leisure. And have a first rental ready to go.

How did you finance this deal?

Conventional Owner Occupant Loan at 6%. With 10% maintenance reserves, 5% CapEx reserves, 7% vacancy reserves, 10% management (though I self manage & consider this a JOB that I choose for extra income) & PITI debt service, the property cashflows $100+/mo. Not bad for an uneducated first investment. At the time I just knew that the income was enough to cover the mortgage, occasional expenses, I had several months of mortgage reserves, the property savings account was growing & mortgage shrinking.

How did you add value to the deal?

Bought with 5% down by living in it for 1+ years before converting to a rental. Creatively renovated on tight budget with sweat equity and discounted materials. Bought in a lower cost area where rent ratios were higher, while being careful to evaluate safety and upkeep of surrounding properties.

What was the outcome?

Did exactly what I hoped. Taught me how to be a homeowner. Began my education on how to be a landlord. Was affordable enough that I could make mistakes and recover with little financial stress. Has been steadily adding to my net worth for 15 years with relatively minimal effort. For someone who is risk averse, or low income, or really new to all the details, buying an ultra affordable (to you) home is a great way to learn real estate investing with financial safety & peace of mind.

Lessons learned? Challenges?

For tight budget: Space Plan for function. Use Everything. DIY. We ripped up carpet & installed clearance laminate. Moving water heater & laundry to breakfast nook, we increased countertop by 400% & added dishwasher. We used countertop scraps to make a drop zone desk w/shelves by back entry. Found quality used or scratch & dent appliances. Probably spent $2-3K + DIY sweat equity. We made choices for affordability & durability while hoping to offer better than average rental for the area.

Investment Info:

Single-family residence buy & hold investment in Burlington.

Purchase price: $39,478
Cash invested: $61,000

BRRR ready. Bought w/cash. Renovated w/cash. Rented. Ready to pull out most or all of our cash invested w/cashback refi.

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

We are buy and hold investors, so my husband and I are particular about craftsmanship and reno choices. We both enjoy taking a home and reenvisioning it functionally and aesthetically. We decided it might be better to get a fixer and have everything how we like it rather than buy move-in ready.

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

Hud Home Foreclosure. It sat on the market for a while because the house was in rough shape and had a tiny yard. We decided on our deal number and made an offer about 15% off asking price. Rejected. We moved on but got a call two weeks later from our Realtor, "You're under contract!". What?? Turns out she checked a box with HUD that allowed the the offer to stand until canceled. Luckily we had not found another property yet, so it was a happy accident.

How did you finance this deal?

Cash and credit. We had money saved that allowed us to buy for cash and to renovate for mostly cash. We went over budget by a few thousand dollars (Electrical and HVAC surprises. A few opportunities to get a lot of value from small upgrades like bathroom tile and adding a closet.) We put that amount on a 0% credit card offer, made monthly payments from cashflow and paid it off before the 0% ran out.

How did you add value to the deal?

Renovated kitchen and added a dishwasher. Renovated bathroom, removing yellowed and leaking shower liner and replaced with tile. upgraded bathroom flooring from sheet vinyl to herringbone wood-look tile. Removed passthrough door between bedrooms, allowing us to take that underutilized space to add a 2nd closet to both bedrooms.

What was the outcome?

Exactly what we hoped for. Appealing low maintenance rental that rents quickly. 25% equity above the cash we put in. Went over budget by a few thousand, but got a great product.

Lessons learned? Challenges?

One lesson learned is to incentivize contractors to adhere to their promised timetables. We were delayed for 3 weeks by a slow sub-contractor. He was money sensitive so I think we could have had more prompt service if he was going to lose money from passing deadlines. Also dealt with my first contractor who didn't want to listen to me (female), but reacted much more promptly when I had my husband repeat my concerns and requests. We won't be using him again, ever.