Analyzing the #s of HH 4 years in & no appropriate BP calculator

[Alicia Bennett]

Greetings! I'm trying to determine how successful my house hack has been. 

Even if its not a big win, it has been a hair pulling, daily crying jag, killing the GC dream inducing, learn the hard way, LEARNING experience. 

 I tried using rental property calculator but it kept returning a crazy number for my monthly costs. I re-did it three times to make sure I was putting in the correct monthly vs. annual expenses with no success. I'll have to work on this.

Anyway, back to my question. I hate math and this purchase was intuitive/emotional more than a numbers analysis. I wanted a duplex (to help cover my mortgage) close to work in a specific neighbourhood in Wheat Ridge, CO. Wheat Ridge a near-in suburb of Denver (10-15 minutes max to downtown) with mostly 50s ranch and mid-mod homes. 

After a couple of months of looking, I was ready to throw in the towel and settle for Lakewood, CO; however, being that she's awesome, my real estate agent said, "no, stick to Wheat Ridge," and within two weeks I found my property. 

So here is the timeline and numbers needed to help with analysis. Closed on property 1/15/15. Brick, five bedroom 2 1/2 bath, walk-out, mid-mod, up/down ranch duplex with four exterior doors. 1314 square feet on both levels.  800 square foot garage. Two minutes walk to the trail of 350 acre park and nature preserve and .40 acres (ok, I admit it, I actually purchased the property for my Australian cattle dog . . .)

Purchase price = $342,500. I put 20% down and my initial loan amount was $272,400 for a 30 year mortgage. (I was bidding against an investor and I ate an extra 2,500 on deal of Amerisave's incompetence. If you want a sadly entertaining story about me frantically messaging the President, CEO, and CFO via Linked In on Christmas Eve because I was about to loose both my deposit and my house let me know. . .)

From the inspection, I knew the house would need the big expenses of new plumbing and electrical. I don't like cooking on electrical and I also wanted gas lines. In August 2015 I installed double paint EE double pain windows for $17, 500 to replace the wood windows--another emotional decision. I could only open one window out of 34 and spiders were more at home in my house than I was. On 11/15/15, my house was appraised at $415,000 and I took out a $30,000 HELOC.

In 2015, Denver's housing/remodeling market was out of control. Finding a good GC who was not only outlandishly expensive, it was turning out to be impossible. So I started doing work piece meal. I gutted the downstairs bathroom and kitchen and installed a new electrical panel for upstairs. After celebrating my one year anniversary with a plumber who installed gas lines that could have killed me, and with the water lines still uninstalled, I found a plumber to tear out the first guys work and do things correctly. My new master plumber was WON-DER-FUL. When I saw the gas lines he installed, my first comment was "there so pretty"--they  also passed inspection. 

Since my plumber was so good at what he does, I assumed that a GC who he said he worked with often would be just as good and hired him to renovate the downstairs unit--NOT SO! I know there are people out there with worse renovation stories than mine but some of my interactions with him and his crew were doozies. 

A two month renovation that started June 2015 stretched into November 2015 and was still not completed. I paid the GC to go away and ultimately found a good handyman to finish the job over the next five months. 

Although I can't locate the exact number, when I did my 2017 taxes my accountant said I spent about $75,000 as of December 31, 2017 and about $50,000 could be attributed directly to the rental. (gutted kitchen and bath and probably overly upgraded the unit with custom cabinets and tile, frameless shower etc. But again, those darn emotions played havoc and I kept thinking in terms of "where would I like to live." But, there was the strategic element of wanting  to attract the kinds of tenants who I'd like to live with. 

Since I live in the upstairs unit, I can write off 50% of the mortgage, utilities, expenses etc. and depreciation. I've paid off my HELOC and 0% interest credit cards that I used to cover my remodel costs.

I also came out very well from the hail storm that hit Wheat Ridge in May 2017. My insurance company paid around $25,000 in repair costs (new roofs for house and garage, new stucco on two driveway retaining walls, shed replacement, painting for deck). The garage roof and stucco were in bad shape before the hail and I was dumbfounded when the adjuster threw those in! I only had a $1050 insurance deductible

After the pain of remodeling, I wanted no part in trying to find a tenant and I paid a management company a months rent to find a tenant. The unit has been rented at $1,495 for two years now. My tenants paid only $1445  for the first six months because they paid six months up front; I gave them a pre-pay discount of $50 per month. My tenants are moving 5/31/19 because they just purchased a house.

Because of Denver's crazy real estate appreciation, my PMI and tax bill is now $1685 due to insurance and tax hikes. I expect another significant increase in May. Zillow price valuations for my house range from $589,000 - $684,00.

I still need to remodel my upstairs. I currently have no kitchen and no bathroom sink; I had it demoed before I moved in and because a contractor told me I had black mold from water damage--it was a lie but the mold did look nasty--ultimately no black mold and no asbestos. Once I realized they type of remodelling costs I was going to incur and since I want what I want for the upstairs, I'm willing to wait and that remodel is on the back burner. Anyway my W-2 works hours don't leave me time to cook and face bowls are overrated . . . 

Although I had purchased "The Book on Estimating Rehab Costs" (i did not know about this website), not knowing what Denver's true remodeling costs. Jumping in without doing a strong numbers analysis and GC has cost me monetarily and led me to intermittent episodes of anxiety disorder; however I feel fortunate and, at this point, undeterred.

I'm emotionally recovered enough that I'm now ready to remodel a house I purchased as a home back in 1992 in Longmont, CO; I held onto it because I always thought I might move back one day. 

This time I'm going to use BiggerPockets, brush up on my math skills, and do the remodelling gig right--hopefully I don't turn it  into a "Hell is paved with good intentions" scenario. . .This will be my test to determine if I have the drive and determination to jump into real estate.

Hmmm, so after my novella, does anyone have any thoughts on the Wheat Ridge purchase? Thank you in advance!