Live In Fixer Upper

[Steven May]

Investment Info:

Single-family residence buy & hold investment in Kansas City.

Purchase price: $125,000
Cash invested: $19,000

Last April 2019 I bought my first Property - 3% down conventional loan that I house hacked. It was a 3 bed, 2 bathroom house in Kansas City, MO. The mortgage was about 850$ and both my roommates paid 450$ so I collected 900$ a month so I was able to live there for free for about 8 months while finishing the basement. Long story short - it is now a rental and I'm earning ~20% CoC return collecting $250/mo in cash flow.

Successful property #1 in my eyes.

On to property #2, I bought from a wholesaler off market who worked with me on conventional financing. This was a 2 bed, 1 bath distressed property in a fast appreciating area of Kansas City, MO called Waldo. I utilized a 5% down conventional loan - and the plan was to live in and fix up the property then refinance out of the PMI. Otherwise known as, a "Live in Fixer Upper."

Closed on the house and got to work on sweat equity. The property was pretty much a hoarder house so the first step was to clear everything out.

The scope of the rehab:

All New Interior Paint

Some Exterior Paint

New Floors in the Master Bedroom

New Stainless Steel Appliances

Painted Kitchen Cabinets and Added New Hardware

Tore Some Kitchen Cabinets Out and Added Floating Shelves

New Light Fixtures

All New Sod in the Backyard

New Privacy Fence

Interior Drain Tile and 3 Support Beams Added to a Basement Wall

Epoxy Painted the Basement Concrete Floor

NEW HVAC System

Framed the Whole Basement Out and Hung Drywall - Mud, Taped, Sanded, And Painted

All in all the live in rehab took 6.5 months

The numbers:

Bought: $125k

Rehab: $11k (1/3 of that was the new HVAC system)

Appraisal: $168k

I was happy with the refinance appraisal number I got

I am able to refinance out of the PMI, lower my interest rate, and lower my monthly payment

I forced about 30k in equity

I did not do a "cash out refinance" as I wanted to live my equity in the home and pull out a HELOC in a few months to allow for a purchase of another property or a "rehab fund."

Alot of sweat equity when into this one, I DIY'd everything besides the new HVAC system, and the foundation work

When it came time for the appraisal, I gave the appraiser my scope of work, receipts for everything, the inital appraisal report at 125k when I bought the property, and also pulled my own comps.

2 Properties Down - Time For The Next Project

Property 1- House Hack (low down payment conventional)

Property 2 - Live In Fixer Upper (low down payment conventional)

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

The ability to do a live in fixer upper in a great area with conventional financing.

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

A wholesaler emailed it to me - I paid full asking price and got him to work with me on using conventional financing even though most wholesalers won't do that.

How did you finance this deal?

5% down conventional loan.

How did you add value to the deal?

Bought under market value and did cosmetic upgrades to force 30k in equity in 6 months.

What was the outcome?

My girlfriend and I still occupy the house because we love the area. With the refinance we live here for extremely cheap. I am about to pull a HELOC as well. Once we move out, it'll cash flow about $350/mo as a long term rental but we will most likely do a air bnb shooting for about $500/mo.

Lessons learned? Challenges?

Always learning how to do DIY stuff as well as learning the ins and outs of a refinance.

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

I am a agent.