Diary of a $3,900 house ... wait, what? $3,900, yes that's right!

Real Estate Deal Analysis & Advice
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Diary of a $3,900 house ... wait, what? $3,900, yes that's right!

Dawn AnastasiPro Member
Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

Okay, so this one is a little out there even for me!

What on earth could I possibly be talking about?  $3,900 for a real house, not a Barbie doll house right?  Where am I -- Detroit???  (See what I did there Josh, you know you were thinking it.)

No actually this is a 1-bedroom, 1-bathroom single family house in my primary zip code.  It's a tax foreclosure, and it took a while to get in there because there was someone living there. They of course left a mess, but luckily it wasn't as bad of a mess as you'd think a $3,900 house would have.

Now, normally I'd never buy a 1-bedroom house and I think it being a 1-bedroom house may have deterred other investors away from it.  But my goal is to turn this 1-bedroom house into a 3-bedroom house!  

And just to be more ambitious, this is the list of everything I want to do:

- Clean all the junk and debris from the house and yard and demo the shed in back

- Replace the roof and fix the gutters/soffits

- Landscaping

- Replace all the windows with double-pane vinyl windows

- Replace all the floors in the house (ceramic tile for the kitchen/bath/laundry room, and vinyl plank for the living room and the upper level)

- Re-do the bathroom with new everything -- plumbing, tub, shower surround, floor, sink/faucet, toilet, mirror, accessories

- Re-do the kitchen with new cabinets, counter tops, and sink/faucet

- Paint the entire interior (white ceilings, beige for walls, white for trim)

- Replace all the light fixtures, outlets, and switches

- Replace the front and back doors and put in new locks

- Add smoke detectors and carbon monoxide detectors as required

- Finish off the upper level (that was begun by someone else)

I want my rehab budget to stay at or under $30,000 and I want to complete everything within 2 months from closing.  I would ideally like to rent this property out for at least $825/month.

I didn't do the best job on my last "deal diary" in terms of keeping it up to date, so I'm hoping I can stay on track with this one.

Step 1 - Make offer. Submitted today.

Step 2 - Get accepted offer. This also happened today!

Stay tuned for more as this story unravels!

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Richelle T.
Rental Property Investor · Columbus, OH · Member since 2014 · 340 posts · 111 votes
11y

@Dawn Anastasi

Congratulations!!! My most recent rental was also a tax foreclosure that I bought for $7,500. It's a 3/1 that we're all in for $32,000 and it rents for $825. Best.Deal.Ever.

Good luck, it will be a TON of work but you can do it! One thing that I would do differently is start with curb appeal and advertise before the property is ready. It's not advise that I thought would be applicable to a rental, but it is. Here's why: People in the neighborhood thought the house was still vacant and were surprised to see it as active again. That is your prospective tenant base! You need time for the perception to update. You know how when you're used to seeing something as dilapidated, you see it that way even if it's pretty now.  Hope that's a helpful tidbit! Congrats again :-) 

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  • Arlan Potter
    Investor/Accountant/Builder · Meno, OK · Member since 2014 · 1k+ posts · 918 votes
    11y

    That's my type of house. Yeah!

    1Reply
  • Peggy Liu
    Investor · Los Angeles, CA · Member since 2013 · 354 posts · 98 votes
    11y

    @Dawn Anastasi Very cool!  I want to see before and after photos! :)

    1Reply
  • Gilbert Dominguez
    Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes
    11y

    If I could get $825.00/mo. for a one bedroom I would be buying $3,900.00 houses and putting in $30,000.00 into rehab on every house or unit I could get. Unfortunately that deal would not make sense in many areas. Where I invest the most you can get is $525.00 with $420.00 being the norm for a one bedroom, one bath. 

    If people are paying $825.00 for a one bedroom where you live  then all I can say is you are one smart cookie and you got one hell of deal.  CONGRATULATIONS!!!!!!!!

    3Reply
  • Ronald PerichPro Member
    Investor · Granite City, IL · Member since 2014 · 658 posts · 301 votes
    11y

    Just followed this thread! Can't wait to see how it turns out!

    0Reply
  • Matthew Schroeder
    Investor · Carmel, IN · Member since 2014 · 332 posts · 245 votes
    11y

    @Dawn Anastasi  Awesome!  Please keep us updated.

    We bought a tiny 1-bedroom in Denver (521 sf) that nobody wanted (DOM:  > 6 months) about 3 years ago, and because of market dynamics, we are getting 40% more in rent than our initial pro-forma projections and sit on a considerable amount of equity (2x-3x).  In short, a lot of people shun these investments but it has been an outstanding winner for us!

    Good luck, Dawn - I wish you much success!

    2Reply
  • Matt Slakey
    Investor · Salem, OR · Member since 2015 · 76 posts · 28 votes
    11y

    @Gilbert Dominguez  I think the $825 would be for the 3 bedroom.

    @Dawn Anastasi, what is the before and after square footage? Sweet deal! Looking forward to pics/updates. 

    2Reply
  • Gilbert Dominguez
    Investor · Chicago, IL · Member since 2015 · 677 posts · 309 votes
    11y

    Matt

    You are right she did mention she was going to be converting the property into a 3 bedroom. Either way it was a good strategy for getting into the property and an all in of only  around $34K for a 3 bedroom. 

    0Reply
  • Carrie Giordano
    Investor · Marina Del Rey, CA · Member since 2015 · 297 posts · 87 votes
    11y

    @? Very cool, I can't wait to see the pics! 

    0Reply
  • Cheri Schaffer
    Woodstock, CT · Member since 2015 · 47 posts · 5 votes
    11y

    Sounds awesome!  Keep us updated. :)

    0Reply
  • Nat C.
    Investor · Miami, FL · Member since 2013 · 807 posts · 475 votes
    11y
    You're awesome Dawn! Can't wait to see progress.
    0Reply
  • Logan Dickson
    Las Vegas, NV · Member since 2013 · 42 posts · 13 votes
    11y

    @Dawn Anastasi

    "Where am I -- Detroit??? (See what I did there Josh, you know you were thinking it.)"

    That's funny! That's the exact thought that came to mind also! Maybe from listening to the podcasts often!

    Good job on that! I would like to see the pictures as well!

    1Reply
  • Julie Kern
    Investor · Taylorsville, GA · Member since 2014 · 352 posts · 540 votes
    11y

    Can't wait to see how it goes @Dawn Anastasi!  This will be fun to follow!

    1Reply
  • Randy E.
    Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
    11y

    @Dawn Anastasi, following, and not so secretly jealous.

    Great catch, Dawn!

    1Reply
  • Mark Elliott
    Investor · west seneca, NY · Member since 2014 · 376 posts · 211 votes
    11y

    sounds like a plan to me. $3900 for a house is not that uncommon. i bought a 1 bedroom, one bath house for $500 one time. yes, thats right, $500. the city had taken it for back taxes, both owners were dead, and the kids did not want the place, so they let it go for back taxes. i bought it from the city for $500 and put about $5000 into it. rentedi t out for many years, then sold it for $10,000. i have bought a house for $1700 thru a back tax deal and another for $4100 thru a back tax deal. cheap deals are out there people, you just have to look for them. good luck with your plan and keep us posted

    4Reply
  • Steven LeRoy
    Flipper/Rehabber · Buffalo, NY · Member since 2015 · 5 posts · 1 vote
    11y

    awesome deal. I like the boldness to take on such a project. Good luck! Can't wait for progress pics.

    0Reply
  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y

    Since this is a tax foreclosure, I had to submit my certificate from the Milwaukee Landlord Training class.  I attended in both 2011 and 2014.  It's a great class, it's FREE, and I believe it's beneficial for landlords in Milwaukee to attend.  If anything, I feel it's too short and they could devote days and days in training landlords in everything they could know.

    Podcast Guest on Show #29
    1Reply
  • Ronnie Boyd
    Fix & Flip, Wholetailing, · West Columbia, SC · Member since 2013 · 215 posts · 60 votes
    11y

    Nice post/thread @Dawn Anastasi... I agree this will be fun to follow along with and see the results. 

    0Reply
  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y

    First picture (although it's a little blurry) -- some of the junk left behind by the prior occupant.  Included in the rehab budget is the cost of a dumpster and labor to clean everything up.  There's stuff inside the house too, but for some reason they thought it best to haul most of their trash outside to sit in the elements.

    Podcast Guest on Show #29
    0Reply
  • Richelle T.
    Rental Property Investor · Columbus, OH · Member since 2014 · 340 posts · 111 votes
    11y

    @Dawn Anastasi

    Congratulations!!! My most recent rental was also a tax foreclosure that I bought for $7,500. It's a 3/1 that we're all in for $32,000 and it rents for $825. Best.Deal.Ever.

    Good luck, it will be a TON of work but you can do it! One thing that I would do differently is start with curb appeal and advertise before the property is ready. It's not advise that I thought would be applicable to a rental, but it is. Here's why: People in the neighborhood thought the house was still vacant and were surprised to see it as active again. That is your prospective tenant base! You need time for the perception to update. You know how when you're used to seeing something as dilapidated, you see it that way even if it's pretty now.  Hope that's a helpful tidbit! Congrats again :-) 

    8Reply
  • Linval T.
    Investor · Bay Shore, NY · Member since 2014 · 1k+ posts · 688 votes
    11y

    @Dawn Anastasi- Wow, this is amazing for the price paid and that you have the vision to transform it into a higher income producing property.

    Congratulations and best wishes in seeing this project through completion.

    1Reply
  • Gautam Venkatesan
    Investor · Dallas, TX · Member since 2013 · 619 posts · 128 votes
    11y

    Congrats @Dawn Anastasi hope you get the property!  Can you expound on how you plan to convert to a 3-bedroom?

    0Reply
  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y
    Originally posted by @Gautam Venkatesan:

    Congrats @Dawn Anastasi hope you get the property!  Can you expound on how you plan to convert to a 3-bedroom?

    There's already 1 bedroom in the lower level of the house.  The upstairs, someone started to finish off, but they didn't get very far.  I want to take the entire upper level and put 2 bedrooms up there.  Right now the 864 square feet doesn't include the second level.

    Podcast Guest on Show #29
    0Reply
  • Mimi Booker
    Investor · Spring, TX · Member since 2015 · 29 posts · 6 votes
    11y
    Sorry for the newbie question, but a few of you mentioned the city "let it go" or accepted your "offer" for back taxes for these houses. Are these advertised? I assume they were not auctions since they took your offers? Where does one look for these? I own 1 rental house in Houston, and now I'm hooked!
    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    11y

    @Dawn Anastasi

    Congratulations, you are an unstoppable force!!   I think I know which house this is ...

    Here I thought I was doing well when I found a 25K REO duplex .... I am once again humbled.

    If I could get over my hesitation with taking on substantial rehabs so far afield, there have been several opportunities in your city which would have been fun and profitable.

    After you get this gem polished, if you want to take a run at a duplex or quad, I'm only an e-mail away ...

    1Reply
  • Dawn AnastasiPro Member
    OP
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    11y

    Here is a non-blurry picture of some of the junk in the backyard.

    And here is a picture of the boarded up shed:

    Podcast Guest on Show #29
    0Reply
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