Hi BiggerPockets!
My name is Alex, and I live in Metairie, Louisiana (right outside of New Orleans). I'm an attorney here in town, but I've developed an interest in real estate investing in the past year or so. My wife and I started in real estate (unintentionally) with buying our first house in July 2017. It's a single family home in a good area that my grandfather built and my mom grew up in. It's been in our family since the 50's but was in complete disrepair. My uncle rented it for a while and let it go to you know what, so we got a good deal. We had to do everything to the house: re-wire, new plumbing, take out walls, bathroom, kitchen, you name it. After getting crazy expensive bids from contractors, I decided (naively) to take on the task of being the general contractor myself. As you can imagine, it was a hell of a project for someone that had no experience, but we got through it and the house is awesome now. My wife's dad is in the flooring/cabinet business, so we got some guidance there but everything else we figured out ourselves. Here's a few pics of our single family:
Living/Kitchen:
Before:
Living After:
Kitchen After:
Bathroom:
Before:
After:
About a year after living in that house, I started getting interested in real estate more and found biggerpockets. I bought the book, read it through, and decided an investment property was our next move. We had to do most of our renovations on the single family house out of pocket, so our cash was essentially gone but we had enough to put 3.5% down on an fha loan for a house hack.
My plan was to find a double that we would be willing to live in, needed some work so I could add value based on my recent renovation experience, and would maximize our rent potential. I started analyzing properties on MLS and came across a double in a good neighborhood in our area that was listed at 370k (the New Orleans area is expensive in good areas). 3 bed 2.5 bath both sides and approx. 3500 sq. ft. total. After analyzing many many deals, I realized that the 3 bed 2 bath combo in our area was the best purchase price/rental income combo.
I put my attorney research skills to work by doing some digging online and in the public records and found out that the owners of the property were the children of a couple that recently passed away. The house was in a trust, so I figured that this house had to be their inheritance and they just wanted out. We decided to go see the property and found out from the agent that they had recently rented to a single bartender at a local bar who trashed one side. This confirmed that the owners simply wanted out, and I turned out to be right.
Our first offer was 340k with $7500 in closing cost, and they took the first offer! I was also able to get another 5k off after inspections. I attribute that to the personal letter I wrote with a picture of my family stating how we would make the property our home. I can thank the biggerpockets book for that one.
The side we were going to live in needed the most work (that's where the bartender lived) and the other side was in better shape since it was the previous owner's unit. There was also an awesome tenant in place who stayed for a while but wound up buying her own place a few months after we closed. We closed in October 2018 and it only took us about 1 month to do the necessary renovations. As you might be able to tell from my single family, my view on real estate is that I'm not going to do it unless I would live there, so we keep our properties nice. This reno consisted of more cosmetic but did require some electrical, plumbing, new windows, and roof repairs. Here are some before and afters of our unit:
Kitchen:
Before:
After:
Living:
Before:
After:
Bathroom:
Before:
After:
I set a goal when we bought the property to renovate and refi out of the fha loan into conventional (i.e. no PMI) within one year. PMI was costing me about $250 per month. I studied and studied the comps every month and finally a comp came through that was exactly the price per sq ft that I needed to get the house to appraise ($115 per sq. ft. to be exact). I was able find a local bank that would give me a loan for a double with 75% LTV and no PMI, so I decided to take a shot. The comps were tight but it appraised with the renovations at exactly what I needed to get out of PMI only 12 months after we purchased! Oh, and we got an entire point lower on our interest rate. Ok, so here are the numbers:
Initial loan:
- - Purchase Price: 335k + $7,500 in closing costs paid by seller
- - Down Payment/equity (3.5 %): 11,725.00
- - Interest rate: 4.625%
- - Monthly mortgage (PITI + PMI): $2450.00
- - Appraised value: $340,000
- - Renovation (both sides): 43k
- - Total Out of Pocket: Approx. 55k
- - Rent from assumed tenant: $1300.00
- - Out of Pocket to live: $1150.00
After Refi:
- - Appraised value: $385,000
- - Equity: 15%
- - Interest rate: 3.625%
- - Monthly Mortgage (PITI): $2050.00
- - Rent (new tenant): $1450.00
- - Out of pocket to live: $600.00
Since we fixed our side up nicer than the other, I know I can get at least $1,550 once we move out. So all in all our total rental income will be $3,000 per month and our PITI is $2,050. I am managing myself right now to get the hang of being a landlord, but will likely hire out an management company when we get a few more units.
All in all, my first deal was an amazing experience, and I've been hunting for the next deal ever since. I've come across a few and made some offers but nothing that has been an actual contender just yet. I've even done a few direct mailings to some properties near my double and have gotten a call or two, which have been interesting to say the least. Anyways, I hope y'all enjoy the post, and feel free to give feedback.
Alex
