Buy a house with tenants... be prepared

[John Wigglesworth]

Investment Info:

Single-family residence buy & hold investment in San Antonio.

Purchase price: $71,000
Cash invested: $45,000
Sale price: $1,200

Got this from a wholesaler and it already rented for $950. We put $20K into the house with a new roof and more as the previous owner neglected the property. Still a good return better than 1%. However, a landlord who wants to offload tenants probably has a good reason. These tenants missed rent a lot and trashed the place. Instead of suing for eviction during COVID restrictions, we just didn't renew the lease. After we replaced the countertop and part of the cabinets from water damage for these tenants soon after our purchase, a year later we were replacing he same countertop and cabinets with more damage from the tenants. They left the house infested with fleas, destroyed a one year old window AC, and left trash everywhere. We put another $25K in the property (including central AC) and stuck with our business model of high quality finishes to get high quality tenants. We raised the rent to $1200 and had a lease signed halfway through the renovation with a very good tenant.

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

Price and location

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

Wholesaler. Bought at asking price.

How did you finance this deal?

Cash. Refinanced 6 months later.

How did you add value to the deal?

New roof, HVAC, flooring, paint walls and ceiling, painted exterior, painted kitchen cabinets and added new hardware, replaced hardware, new light fixtures, new doors, granted countertops, subway backsplash, put sod over muddy yard, partial fence, updated breaker box, new appliances.

What was the outcome?

After we got rid of original tenants placed by previous owner, this was a great deal. Increased rents from $950 to $1200.

Lessons learned? Challenges?

Don't get too friendly with contractors. Our contractor became a little to comfortable and really slacked on the work. Had we not become friends and maintained a client/contractor relationship only this might have gone better. Our friendship remains, but I ended up firing him and finishing the last few days work desperately on my own with some help I called in at a daily rate. The house wasn't ready and a new tenant had signed a lease, so I had to refund 8 days of rent due to the delay.

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

I use a general contractor / handyman named Robert Chavez to save me when this project started going sideways. Everything he does is good, but he stays booked as a result. He has done excellent work hanging doors, sheetrock, painting, putting up cabinets, backsplashes, installing P-traps and garbage disposals, etc. His prices are very reasonable. I can share his information if someone reaches out and I let him know.