Foreclosure Case Study #3 / Buy and Hold Strategy

DSC_1352As many of you know, I have a military background. My father was enlisted in the Air Force…and later on in life, I graduated from The Air Force Academy and served honorably.  I wish that we were able to give more to our men and women of service for the sacrifices they make.  DSC00435

I usually try to flip a property as my first option. I approached this foreclosure with the idea of flipping it until I met the occupants. When I knocked on the door, a young lady answered.  I immediately noticed she had a newborn baby in her arms…maybe a month old.  She also had a two year old son watching tv in the background.  I found out that she was renting the place from the owners and had no idea what she was going to do once the property got foreclosed.  Her husband was on active duty at Ft Carson.  He was deployed in Afghanistan at the time. He had set up a rental allotment that was going to a property management company so that his wife and young kids would have nothing to worry about while he was gone.  Unfortunately, the owner was not paying the mortgage. She was kind enough to let me walk through the place. The property was not in the best location, but she showed extreme pride of ownership by taking care of it so well.  I knew I had to do something beyond serving my own needs.

Here is the analysis on the property:

We helped out.  We bought the property for $79K.  We kept the tenant in the property and continued renting for $1,100 per month.  We got most of our money back out of the deal by getting a mortgage on the property.  By leveraging our cash position, we only had $19,000 invested in this deal and we were cashflowing the property about $500 per month.  For helping out…we made 33% on our money annually and then sold the property and made another $10,000 on our investment.  Over a three year time span we made over 100% on our investment.  Always have a plan B!

 

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