Salesman Quits Selling Windows
And Opens Door to Investing

Editor's Note: This is the 30th installment of "My Investment," a feature that profiles real-estate investors, their strategies and their properties. We take a look at their investments, expenditures for improvements and/or mortgage costs and their selling prices upon resale -- and compare investors' profits to home-price appreciation rates in the area.

The Investor: Phil Hallman, 28, quit his job as a window salesman in 2006 to work full-time as a real-estate investor. Mr. Hallman, who lives in Provo, Utah, says he realized his sales skills might give him an edge as an investor in the state's active real-estate market. He's held numerous jobs -- including working as a pharmaceutical sales rep in Japan -- but says he likes real-estate investing the most and wants to specialize in buying "distressed" property from owners facing foreclosure. He also plans to invest in multi-unit properties (apartment buildings, trailer parks) where he can hire managers to handle day-to-day tasks.

The property: The A-frame wooden cabin, circa 1972, is located in Nephi, Utah, a community about 40 miles from the city of Provo and 48 miles from Orem, both in Utah. The 1,300-square-foot property has three bedrooms and one bathroom and sits on a quarter acre with fruit trees and a vegetable garden. Mr. Hallman characterizes Nephi as a "small country town" with large open spaces where horseback riding is popular. The community had 5,045 residents as of 2005, according to U.S .Census estimates.  Mr. Hallman says he learned of the property's availability while shopping for other investment properties in Nephi. The home's potential to generate cash flow (the profit remaining after a property's mortgage costs, taxes and insurance are paid) and proximity to amenities such as an area golf course intrigued him, he says.

Purchase price: $79,000 in September 2006. Mr. Hallman purchased the house through a deal in which the former homeowner was his lender, meaning he paid her his mortgage. He didn't place a down payment. He and the seller have since reorganized their loan so he now pays the bank directly. Mr. Hallman says by initially making the seller his lender, he was able to borrow at a 6.25% interest rate, less than the 7% he may have had to pay under a conventional bank loan designed for investors. He still pays 6.25% under his new loan setup, he says.

Additional investment: $2,000. As part of the purchase, Mr. Hallman paid the seller the roughly $2,000 that she owed for utilities and other bills. He has not made major improvements to the home.

The strategy: The investment produces $214 per month in cash flow, and came with a tenant already in place. The renters pay $795 a month, plus their utility bills. Mr. Hallman plans to leave Utah within two years and begin investing in multi-family properties (and hire a property manager to oversee daily matters). He hopes to sell the home for $104,000, 31.6% higher than what he paid. If he doesn't succeed in selling the house, he could retain it since he is making a monthly profit, he says. But, his priority is to sell the cabin and reapply the proceeds in other investments, he says.

The pitfalls: Using a seller as a banker is easy on paper but can carry some complexities that borrowing from a lending institution would not, Mr. Hallman says. For instance, the seller in this situation retained a sentimental connection to the property and recently called to complain that his tenants had cut down some of the yard's vegetation, he says.

The transaction: Mr. Hallman plans to sell the home for $104,000, or $25,000 more than the $79,000 he paid. He is marketing the home below its appraised value of $120,000 because he is pricing it to sell, he says. "I do want to move it pretty fast and I figure another investor might want some wiggle room," he says. Working in his favor is that he bought the home below market value (because he negotiated the deal directly, the seller saved by avoiding a real-estate commission) and because Utah is enjoying attention from investor spillover from pricier locales, he says. He intends to reinvest profits from the sale in a multi-unit property, potentially a trailer park. He expects he will pay capital gains tax when he sells, but only at a rate of about 5% (or $5,200) due to other offsets in his portfolio, he says. He is a licensed realtor, so won't have to pay listing-agent fees.

Do you think this was a good investment? Share your thoughts on this property.

Do you have a second home or rental property that you think would make a good My Investment profile? Email a description and photo of your property.

-- Ms. Hodges is a free-lance writer in Seattle.

Email your comments to rjeditor@dowjones.com.