Deal Details: The Ugly House

The Basics of the Deal:

“The Ugly House” is a 2/1 and was purchased for 25K cash and it is in rough shape and has several code violations filed with the city that need immediate attention.

We called this “The Ugly House” because it was clearly the ugliest house on the block and general area!!!  It is in a very nice part of town and on a large lot.  I suspect this will be rented within days of putting the for rent sign in the ground.

Expected and Initial Plan:

We will address the three city issues which basically highlight the removal of 3 cheap and poorly built items, two carports and a glob on.  We expect the repairs to cost around 10K and include brand new fencing, the creation of a patio area, painting inside and out and new fixtures in the bathroom. We expect it will rent for $795-$750 once repaired.

Actuals:

We will update this as we go along as to date we have only had 3 days of ownership and we are attacking the city issues first so we can move on to the more important and more valuable areas. 

The patio will go where the glob on currently is and is really going to add value to property now and in the future.

Current Status of Property:

The property is currently under repair and the removal of the city issues.   We expect the property to be rent ready inside of three weeks.

We own the home free and clear and we will own this property for a long time as the house is in such a nice area of town. 

Lessons Learned:

Don’t run away from homes that have city issues.  Research the issues and walk the property to see how big of an issue it will be for you to fix.  We were not the first buyers to see this house but we were the first to pony up and say we will take it as-is with the city issues (But you have to take our Price!!!!)

Get to know more and more agents and be very upfront and honest about what you want to get done.  In this case the agent shared all the issues, talked about all the buyers that backed out and we said we are interested but it has to be at our price.  It had been listed so long that they just wanted to get it sold and we held up our end of the bargain and closed the deal.

Grade the Deal and Why:
It is probably too early to truly grade this deal but to date but I see no reason to give it a grade lower than a B+. 

I would rather have better leverage as you don’t get any leverage when you pay cash but what the heck are you going to do with a house that cost 25K and needed to close in 10 days.

Future Plans for Property:

We will hold this property for the long term.  Once it is completely repaired and rented we will look to extract equity somehow - some way.  We will either get a bank to provide an equity line or we will secure a private money loan as we would like to keep the equity recycling. 

Another outcome for this property given we own it free and clear is we would be open to trading it for equity in multifamily (for example it could be our down payment on a 8 or 10 unit building).