What Happened to the Fidalgo Fixer?

This is the end to the story of our second investment purchase. The Fidalgo Fixer is a personal home renovation with an ADU on the property. You can read about the purchase and construction process in my other posts. Construction wasn’t smooth. On the final inspection, a new inspector came out and failed us. Imagine me with a 5 month old baby in my arms calling the City in an uproar. We worked it out and a week later moved into our new home. The ADU and garage was rented out immediately for $1450 a month. During the course of our occupancy, it was always rented and covered our $1450 a month mortgage payment. We had our normal course of tenant issues (backed up sewer, broken appliances, etc.) but it never bothered us that someone else was living on our property and paying our mortgage.

When we purchased the property we intended on keeping it forever as a rental. The City only allows ADUs to be rented with the owner living on the property, so we looked into converting it into a legal duplex and it was doable. It was going to cost about $20,000 in fees to the City and we were going to spend another $30,000 in updated and separate utilities and increasing the studio to a two bedroom. It was a spend that would make us an additional $500 a month in rent, so the 1% rule of thumb on our investment, but it was going to be a little more complicated that we wanted to get into, and then we found a better real estate opportunity.

That’s the great thing about real estate, it has lots of options and flexibility. We thought we’d never part with our first home, but selling this home was also one of our best plays. We purchased it for $255,000 and put a total of $90,000 into the house. We paid interest only while living there and doing the construction, and then rented out the ADU and basically lived for free for over three years. We sold it for $448,000 and came away with some serious, almost all, tax free profits. I love that real estate is creative and while I thought we would never sell this house, changing course was still a good thing. On to the next deal.