First off, I am just as nervous about most of this COVID-19 stuff as everyone else. However, fear of the unknown can’t scare me away from a great deal!
I am an experienced investor with 13 years under my belt. I mention that because if you are inexperienced, I wouldn’t recommend you do what I’m about to describe that I did.
Recently, I bought four houses—none of which I’ve been in. Yes, that’s correct. I did not enter the houses before closing—or after.
One of the houses will be my personal residence. I bought it based on square footage and the price. After the wholesaler accepted my offer, I then drove by the property to see my future residence.
But I’m getting ahead of myself. My house was the third of the four I purchased. Let’s get into the first two properties first.
Why I Bought Rental Properties During the Coronavirus Pandemic
The first two properties were rental properties that were undervalued. A wholesaler brought them to me, and I knew these were GREAT deals right away.
- They were already rented out.
- Property management was in place.
- They had $100K worth of equity on the ARV.
- And the best part… they were under $50K to purchase.
I called around to get funding. Unfortunately, it was difficult due to a lot of lenders pulling out of deals because of COVID-19. I finally found a lender at Carolina Hard Money that was still lending. They were able to smoothly close the deals.
The terms were hard money rates, however. The key is to take them down. I normally refinance into longer, cheaper money anyway.
(Side note: If you are not familiar with the BRRRR strategy I strongly recommend you read up on it on BiggerPockets.)
These properties are intended to be long-term holds in a newly appreciating market.
Why I Bought a Primary Residence During the Coronavirus Pandemic
The next house I bought was a primary residence. I’ve been wanting to buy a new primary, as I am eligible to get tax-free capital gains on the sale of my current house. Prior to this, I had just never found the right property for me.
A wholesaler bought this deal with me in mind before sending it to me. When he sent it, I was concerned that right now no one is buying because of COVID-19 and most off-market deals in that neighborhood were not moving because they are at top-of-the-market prices.
But I gave in and looked at it. I had done a flip on that street before. However, according to my recollection, the street was a little rough. I wasn’t sure I wanted to live on it. We haggled on price, and he accepted.
I rode through the neighborhood to see what was going on. There was a lot of improvement, but it wasn’t all the way there yet.
I did know new and rehabbed houses were selling for $200/square foot, though. Online it said this house was a 3-bed/2.5-bath and 1,300 square feet. The wholesaler provided me pictures and said the listing was wrong—it was actually 1,600 square feet and five bedrooms.
The house was rented at $1,200 to a tenant paying month to month. So, I figured if the house was either 1,600 or 1,300 square feet, I couldn’t lose either way at a purchase price of $135K.
So, 10 days later we closed on the property. Currently, I am working with the tenant to ensure a positive future for them.
Why My Most Recent Investment Was Irresistible
The last house I bought was another rental—the price was too good to turn down. I wanted to hold off on purchasing right now, but the same wholesaler who sold me the first two properties brought me another home run deal: It was rented for $750, had a $50K asking price, and property management was in place.
I had to pull the trigger ASAP. And I even got the deal cheaper than asking.
Apparently, he had it sold, but other buyers pulled out due to coronavirus. Those investors had intentions to flip it. Personally, I wouldn’t get into a flip in this climate.
The Bottom Line
In conclusion, no matter the market, deals will always be around. Three out of these four properties I bought for return—not speculation.
A lot of people think those who fix and flip make a lot of money; however, flippers take great risks to get their checks.
I don’t know about you, but I wouldn’t want to have a $500K-plus house to retail right now (even though in Charlotte, North Carolina, retail sales are currently very strong).
Regardless, anything priced above the first-time homebuyer price point is very risky at the moment. Just remember, when you buy on returns, it’s harder to lose on the investment.
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