Live In Reno With Flip or Rent-by-Room Potential

[Eduardo Aguilar]

Investment Info:

Single-family residence other investment in Sacramento.

Purchase price: $460,000
Cash invested: $65,000

My wife and I purchased our second home in August of 2020 with an eye to either reno and sell at the two-year mark or hold and keep it as rent-by-room investment. The home itself is a 4 bed, 3 bath, nearly 2,400 square foot home with a two car garage and a comfortable backyard. The Seller (also a Real Estate Agent) had completed some easy updates but we saw the opportunity to add value and boost the sale or rent price.

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

When purchasing the home, my wife and I went in with an eye on ROI which included the live in fix and flip as well as the hold and rent-by-room option. We ran the numbers on a straight family rental and the numbers unfortunately did not pan out. That being said, the rent-by-room option is one that we are heavily considering as we are fairly close to Sacramento State University and only four blocks to the American River Bike Trail that gets you straight to the campus. Though we're still consideri

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

We found this deal in the MLS. It was an insanely quick turnaround on our offer as the agent was about to accept a comparable offer but appreciated that I'm an agent myself along with our conventional financing. In order to compete with the existing offer, we came in a full asking price ($475K), though we ended up closing at $460K after two low appraisals ($440K and $455K) and a $5 appraisal gaurantee.

How did you finance this deal?

We bought this house with 5% down conventional loan and was able to use my 2.5% Buyer's Agent commission towards the purchase. At the time of purchase, our home was fairly unique in size and so we experienced an appraisal shortfall and ended up having the Seller pay for a reappraisal that also came up short and so we settled on a reduced purchase price of $460K down from the original offer price of $475K and paid a $5K appraisal guarantee.

How did you add value to the deal?

Our flip work has started with the upstairs bathroom that was triggered by a disconnected overflow drain in the tub. This led to my wife and I taking on the demo and hiring out the relocation of some plumbing and the installation of new tile. I took on the sheetrocking, adding texture and painting of the bathroom. All in all, we were able to complete the project for around $10K once you factor in a high end vanity ($900) and some higher end fixtures ($400). Next on our list is our kitchen and gr

What was the outcome?

We're still in the renovation process but have gained some serious insights, skills and confidence that is allowing for us to take on bigger portions of the subsequent renovation projects including taking on the full kitchen demo and cabinet install. Based on market trends, we're feeling confident that we will be able to get this home back on market in late summer 2023 to close in the $565-$575 range. As such, we're working to keep our investment to $75K max to still turn a profit

Lessons learned? Challenges?

Buy all of your bathroom fixtures, toilets and vanities ahead of having the contractors start their work. In doing so, you'll make sure that they're installing the right fittings for your selected items and so will do so from the get go rather than having to call them back out to replace the standard items that they bring to install.

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

I myself am a Realtor here in Sacramento and had the pleasure of working with one of my closest lenders Ross Rushton at Fairway Mortgage Company who I strongly recommend!