Our First Deal

[Stephen Chittenden]

My wife and I have two rental properties that we've converted from our personal use. One is our old townhome that we used to live in and the other is a single-family home that we bought for my parents to live in. They moved out of the area and it's been a great rental ever since (knock on wood). Last year, we partnered up with a coworker of mine and his wife and formed an LLC with the goal of acquiring buy and hold properties. This was the first purchase we made, and as of now, we consider this a success.

Purchase Price: $69,000

Closing Costs: $3,200

Rehab Budget: $55,000

Actual Rehab: $94,000

Carrying costs (utilities and grass cutting): $500

Total Investment: $163,500

ARV: $ 205,000

Cash-out: $ 147,000 (after finance closing costs)

Total Cash Invested: $ 16,500

Rent: $1595/mo

We found this VA foreclosure on the MLS in March 2014, with a list price of $89,000. By April 2014, it had dropped to $84,000. We made an offer at $65,000, which was rejected by the VA. We made another offer for $71,000, which was also rejected. Sometime over the summer, it was relisted at $72,000. We made an offer of $69,000, which was accepted, and we closed on July 25. The house was listed as a 3-bedroom 2-bath, but had 5 potential bedrooms (none of them had closets).

We spent the next two months bidding the job out with various contractors. The original rehab plan came back with bids ranging from $110-150k. We scaled back our design plans, and went with a bid for a $55,000 rehab. The plan was to rehab the house to a 5-bedroom, 2-bath home with a main floor master suite (the existing layout did not have a master suite).

What was supposed to be a 3-month rehab stretched into a 6 1/2-month rehab. During the rehab, we encountered… a break-in that removed old radiators (fortunately, we were planning to remove them anyhow); a complete failure of the relatively new boiler; a complete failure of the A/C system; rotten floor joists in an existing addition; missing ceiling joists in an existing addition (only 4 joists over a 20’ span); a rotten subroof covered up by 5-10 year old shingles; and more. In the end, we put in an entirely new central A/C and forced air heating system, all new pipes, new sump pump, and a lot of new electrical.

In any event, despite being way over budget, I think the rehab came out pretty nicely…

The exterior:

(Before)

(After)

This laundry room space later became the breakfast nook and part of the kitchen.

(Before)

(After)

This bedroom became the master bedroom:

(Before)

(After)

This odd utility space is what became the master bathroom:

(Before)

(After)

This was the hall bathroom:

(Before)

(After)

(Dual Vanities)

Second Bedroom:

(Before)

(After)

Study and Foyer:

(Mid-Demo)

(After)

Living Room and Foyer:

(After)

This is one of the three upstairs bedrooms.  It is by far the largest.

(Before)

(Mid Demo)

(After)