First foreclosure rehab completed and rented

[Matt Spicer]

On 11.19.14 I purchased my first foreclosure for investment purposes. I acquired the property for $30,001.00 from HUD and was able to close in only 14 days on the property.

I am consolidating threads so it can help be see the entire process in one place.

First the home we purchased was 5 blocks from my current home and comps for the area were 90-110 for the size home depending on the if it was updated. We used the conservative ARV of $90,000 and we have estimated $30,000 in repairs and improvements. We followed the 70% rule ($90,000 x .7 = $63,000) deducted the estimated repairs and put in the offer of $30,000.

Here is how the house was:

My original plan was to update the windows and all the plumbing, It had various updating through the years and was a mess of black pipe, copper and pvc.   I also wanted to add a half bath to the main floor and have a presentable bathroom and kitchen I would be content to have in my home.

I did all the demolition of the bathroom and kitchen to reduce costs as much as possible.  We had a couple of small surprises.  The main water line was leaking at the foundation when we had the water turned on by the city and the relatively new furnace had a blower that needed attention.

One other issue that I didn't account for properly was the lead paint that covered the house.  I quickly had to redirect the money I had budgeted for painting the outside to covering it with insulation and vinyl siding.  

Here is the finished results in 43 days from closing.

Kitchen

Half Bath

Living Room

Main Bath

Bedroom 1

Bedroom 2

Bedroom 3 (more like small office)

During the first weeks of the remodel I started to like the house and decided I would rent and hold the property.   I found a couple that recently married; one works as an art teacher at a local school and the other works for Amazon.  They were interested in a 2 year lease agreement @ $625 which is slightly below market value in the area but a 2 year lease was very attractive to me.   

In the end I came in under budget @ $27,912.64 including one small upgrade I made in the kitchen for granite counter and under-mount sink.  I would have rather waited for the laminate counted but I had a tenant moving in January 1st and I could have the granite faster.  It was $600 more than I had budgeted but it all worked out and the tenants love it.

All said and done I am happy over all with the experience.  I plan to put a mortgage on it for $40,000 to use forward on the next property.  I wanted to do the entire deal with cash just to have a better feel for how much was being spent and the small things didn't add up in the end.  I believe this was a good approach for me and now to find the next property.