My First SFH Rentalf

[Brady Lamprecht]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $38,000

Cash invested: $35,000

This was an extremely distressed property that had a caved in kitchen ceiling and some really worn out carpet. After I submitted my offer, I discovered that the owner of the house had previously passed away so the title was held in a trust. During the closing process, I learned that the house had a lien on it from a company which no longer existed and needed to be resolved before my name could be placed on the title. All in all, it took 2.5 months to close after I initially put an offer in.

What made you interested in investing in this type of deal?

The fact that it was so distressed and had been sitting on the market for so long piqued my interest. These type of houses that no one wants to touch meant to me a potentially great opportunity to learn the ropes and the potential for a decent amount of profit.

How did you find this deal and how did you negotiate it?

Following the advice I found in the book that @David Greene authored, I sent out mass emails to several real estate agents, contractors, lenders, and property managers to see who would reply. After interviewing several on the phone, I had my team in place and it was time to go all in.

It was listed for $54,000 and I offered $40,000 which was accepted. During due diligence, I discovered the roof had been poorly repaired and need additional work so I negotiated it down to $38,000.

How did you finance this deal?

Initially, I thought I would use a traditional loan with 20% down, but then I realized that it would be too much work to get the lender to approve the loan based on condition of the house. So I purchased it with cash that came from a HELOC that I opened against my primary residence.

How did you add value to the deal?

It was a 3 bed / 1 bath with a decent amount of square footage, so I decided to attempt to add an additional 1/2 bath to push the value of the property higher. By rearranging some walls and tapping into the plumbing of the laundry room, my contractors were able to create an additional 3/4 bath attached to the master bedroom.

What was the outcome?

The entire rehab took much longer and cost more than I expected it to due to some knob-and-tube wiring that a section of the house still had in place which needed to be replaced. Also, the A/C condenser was stolen right before closing which I had to get replaced (the owner wrote me a check for the majority of the cost).

It is currently rented out a $895/month and my conservative flow is at just over ~$400/month.

Lessons learned? Challenges?

Early in the renovation, my contractors sent me a photo of a bone they discovered underneath the bathtub. The photo didn't have anything else in it to compare against so the first thing that came to my mind is "What type of person was the previous owner?" and "My holding costs are going to skyrocket because the police are going to have to do a full investigation." Luckily enough, the Medical Examiner was able to determine it was a turkey bone that most likely came from a county fair.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Jerid Cook from 918 Home Team in Tulsa is a great person to work with as he is always willing to help.

Also, Michelle Leach from Titan Title in Tulsa is as knowledgeable of a person as I know in working through title issues such as the one I experienced (property title in a trust of a deceased person that also had a lien against it from a company that no longer existed).

Before Photos:

After Photos:

There was beautiful wood floors discovered under most of the "nasty" carpet which I had refinished:

[Brady Lamprecht]

@Darrell Bratton The rehab took place from the 2nd week of May into the middle of July, so almost 10 weeks in total.  The budget I was initially quoted was $22,000 but that was increased to $27,000 due the the replacement of the knob-and-tube wiring.

I didn't want to mention it in the post, but since it was asked, the contractors did well on most of their work, they failed to use warranty their work as issues came up after the tenants moved in which should have been noticed.  Also, at the end of the job when I was billed for materials which I had already provided, several of the items somehow "disappeared" and needed to be purchased again.  Unfortunately, I had to part ways with that set of contractors.

@Michael Bennett Thanks, I appreciate the compliment.  Let me know how yours turn out.