The seller were an older couple who had apparently been there for 40 years but still managed to owe 80% of market value. We ended up paying $10k more than I wanted to but they needed that much to get out of the house or lose it to back taxes and at the end of the day I felt that it wouldn’t kill my numbers but would mean a lot to them. The house was on the MLS for a long time and had gone through a few minor price reductions but they literally could not afford to sell it for any less (or apparently pay the property taxes). It was tchotchke heaven. The house itself was built in 1890 but is super solid and everything looks square. We paid $55k knowing it wasn’t a fantastic deal after factoring the rehab but the numbers are still pretty good and the location is solid.
The house has a nice view of the only upside down stoplight in the US of A.
- all replacement windows
- amazing first floor layout with 10′ ceilings
- lots of light and good views
- great location for nightlife, walking, bus line
- hardwoods throughout first floor
- only bathroom is on second floor
- everything is from 1940
- small bedrooms
- leaky roof
- super weird bedroom layout, one bedroom closet is in the bathroom!
- yard has drainage issues
- no driveway or garage will hurt when renting
- kitchen is carpeted and has really dated counters
Since I am putting most of my effort into the other house, I contracted out a lot of work: painting (walls, ceilings, trim), floors (refinish hardwoods, new linoleum in kitchen), roof (of course), carpets (stairs and all of second floor). Plus I always use contractors for electrical and plumbing. We prepped for the painters by removing all the drapes, nails, outlet covers, etc. Anything to make their job easier and faster. This took a lot of time but makes the install go quickly. I always help out my guys and like to think they appreciate a nicely prepped job site.
We also spent the money to buy all new appliances to replace the ancient (but functioning) ones that were left behind. I sold the fridge and gas range on craigslist to recoup a few bucks and let Lowes take the massive 1972 deep freeze since nobody was interested in it.
This one should rent for 1.2% of purchase price plus rehab. For financing we used conventional 80% loans on both and the down payment came from a HELOC on another rental property. We will cash flow over $250/mo on this one after factoring in the following:
- 4% vacancy
- 7% general repair fund
- 5% CapEx fund
- Annual HVAC maintenance on furnace and AC units (~$175/house/yr)
Certainly not a get rich quick scheme as many others on this path have pointed out. We are long-term buy and hold to either have passive income or cash-out for retirement.
Going forward the plan is to lay low for 6 months or so to make sure there are no surprise expenses with these new houses then scale up to larger multi-families. Doing two rehabs at once we used the majority of our war chest so we really need to get these rented out now and build up some funds.
- New ceiling in front porch
- New motion detector light in front porch
- Refinish hardwood floors on first floor
- New carpet on second floor and stairs
- New paint job from top to bottom
- New stainless appliances (fridge and gas range)
- New staircase to basement
- Repaired smashed up closet in one bedroom
- Whole house cleaning
- Moved the gas line for the range from the middle of a wall back to the original location on the other side of the kitchen
Just for kicks, here are the freezer and gas range that came with the house:
Here are some before and after pictures (more to come as well)…