What I did when I inherited my childhood home.

[John Nicol]

Investment Info:

Single-family residence other investment in Shawnee.

Cash invested: $72,000

Inherited jointly with my brother. He did not want any liability or responsibility in the house as it was in pretty bad shape. So he gifted his half to me. The value of the home when I got it was $110,000. When finished I will have put in $72,000 on repairs and updating the house. The median home value in the neighborhood is around $250,000. I expect the value to be at least that if not closer to $265,000.

Once completed with remodeling, I plan to rent it out with rent being somewhere between 2100-2250. Until the investment is returned. Possibly use as collateral in order to purchase my second property. I have learned a lot about the repair process and costs associated with major issues like mold, foundation issues and major land overgrowth. Overall a good learning experience for me to estimate repairs going forward.

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

It was not something I had thought about before It happened all of the sudden. I was hoping my brother would join me and try to build something together that our dad would have been proud of. But we are different people. Both have families to think about and I decided I am never going to get this oppurtunity again so why not restore it and make it into a stream of income and allow myself the ability to buy other properties. I learned so much and made contacts that I can bounce ideas off of.

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

Since the house was inherited. The negotiating was more with the GC and what to do myself vs what to contract out.

How did you finance this deal?

I used a margin loan on a brokerage account to pay for repairs and remodel. Insuring, financing and everything was extremely hard to aquire so instead of paying cash I took my financial advisors advice and used a margin loan for part of the repairs. Mainly the initial portion to get the work started.

How did you add value to the deal?

I could have sold a couple of times before putting so much money in but I know the market and the location of this house. I just had to bring it up to the level of the houses in the neighborhood. Which the neighbors are greatful for.
The potential conservative return on what I put in is well worth it. 3 new bathrooms, new carpet and new flooring in the whole house plus a brand new kitchen. The only thing that was left in the kitchen was one 5 foot long cabinent that we kept the box.

What was the outcome?

Not completed yet. However all major repairs are done. I had to fix foundation which had cracks. Mold throughout the house. No floors left and no left. They will be installed within 2 weeks. Then I will paint the interior and list it for lease.

Lessons learned? Challenges?

Make decisions and communicate clearly. Don't assume work has started or you have everything ready to start. Make sure to plan for what you want done.
The biggest challenge for me was taking emotion out of the picture. I initially wanted to go all out and make it top of the line everything because of the condition and growing up in the house. I had to be realistic. Especially since I have never done this before. But now i'm hooked and want to do it again.

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

I had real estate agents knocking on the door leaving cards everyday for the first few months. I did have one come and take a look inside while it was gutted to get some ideas on where to put the money I had planned on spending.
A good financial advisor with a lawyers that can walk you through things is essential. I have yet to work with any lenders but I am looking for private money lenders who are looking to finance a portion of my first full fix and flip.