Mom Finds Real Estate Investing
Profitable, But Wants to Sell

By JANE HODGES
August 24, 2006

Purchased: June 2002 for $177,000

Sold: The investor plans to set an asking price of $259,000.

Home-price appreciation: 46.3%, if the asking price is met.

Average return on investment: 20.4% -- a profit of $153,307 divided by $177,000 (purchase price) comes to 0.866, or 86.6%. That number divided by 4.25 years (how long the investor will have held the property, if she sells by September) equals .2037 or 20.4%.

The investor: Marissa Ignatowich, 35, is a married Darien, Conn., stay-at-home mother with two children. She once worked in the financial industry in New York. Ms. Ignatowich says she began investing in real estate in 2002 as a "defensive" move against a slowing stock market and owns three investment properties.

The property: A Federal-style 1825 home located near Wesleyan University in Middletown, Conn. The house is in the downtown business district, is zoned for residential and commercial use and is listed on a local register of historic properties. Known as the "Robert Trench House," the 2,300-square-foot building has two air-conditioned apartments. The ground floor is used by lawyers as office space and the top-floor unit is rented by grad-school students. The first floor has hardwood floors, one and one-half baths, a kitchenette with dishwasher, and washer/dryer hookups. The second floor has a carpeted one-bedroom, one-bathroom apartment with a washer/dryer and a kitchen that includes a dishwasher. The property is next to Wesleyan's bookstore and café.

Purchase price: $177,000 in June 2002. Ms. Ignatowich bought the property without any financing.

Additional investment: $9,500. Ms. Ignatowich spent $6,000 on exterior painting, $1,500 on new carpeting and $1,100 for a new washer/dryer in the top-floor apartment.

The strategy: When Ms. Ignatowich sees a coming vacancy for one of her properties (the apartment in this house will be available October 1, 2006), she puts the property up for rent, but also advertises it as a for-sale-by-owner listing in the hopes of getting a full-price offer. Economic conditions have changed since she began investing in real estate, she says, so she's considering selling her properties for other investments. She made her purchase before real-estate values began appreciating significantly and is making a profit from rental income, so she could feasibly retain her investment properties -- which also includes another mixed-use building in Middletown, Conn., and a vacation rental in Long Island, she says. These investments were "a defensive move made at a certain time in my life," she says, adding, "I'd love to sell." If she doesn't get her asking price on this property, she won't sell, she says.

The pitfalls: Rising property taxes -- which went from about $2,500 in 2002 to $4,055 this year -- have added to her costs, she says. Owning a property with university renters can be time intensive, she says, since she often needs to find new tenants and oversee frequent cleanups between leases.

The payoff: $153,307. If Ms. Ignatowich sells the home on her own for $259,000, she'll make $143,867. The math works this way: $259,000 (sale price) minus $177,000 (purchase price), renovations ($9,500) and a 3% anticipated commission for the buyer's agent ($7,770) comes to $64,730. From this subtract homeowners insurance ($3,400) and taxes ($17,673) to get $43,657. Add rental income ($109,650), which adjusts her take to $153,307. Ms. Ignatowich does not expect to pay capital gains tax due to offsets from other investments. She says she considers the property a good investment -- the home appreciated in price 46.3% since the time of purchase. (The rate appreciation for area homes for the same time period was 49.1%, per Zillow.com.) "Ultimately, it was easy to find renters," Ms. Ignatowich says.

Write to Jane Hodges at rjeditor@dowjones.com