Investment Info:
Single-family residence buy & hold investment.
Purchase price: $325,000
Cash invested: $81,209
The home started as a 2/1, when we purchased it the previous owner had installed another bathroom already and converted the single car attached garage into another bedroom, so we basically bought it as a 3/2. We then added a closet to the main front living room and built a wall around the entry to create a seperate entrance for this room, and the converted garage, and seperated the living room/bonus room in the back into two bedrooms, giving us a total of 6 bedrooms. The home is near a college and a military base, so the goal here from the beginning was to rent by the room, so we also added a second set of washer/dryers and built in convenience features. We wanted to make sure each tenant had their own defined space within the home, so we added 3 section medicine cabinets to both bathrooms, and vanities with 3 drawers and labeled each of them so there was no mistaking what space belonged to what room. We also labeled 6 of the cabinets so each tenant had defined space within the kitchen and labeled the washer/dryer sets with "Rooms 1,2 and 3" and "Rooms 4, 5 and 6."
We basically stripped the house down to the studs and did a full cosmetic rehab, including all new kitchen cabinets and counters, all new appliances, all new bathroom tile, cabinets, counters and fixtures, installed solid core doors for sound proofing and security, smart locks on each individual bedroom for convenience and security, all new exterior siding, new furnace and AC, new electrical panel, installed all GFCI outlets since old outlets weren't grounded, new LED light fixtures, new exterior doors, and more. At the end of the job we realized that we definitely did more than we needed to, but the reception from potential tenants was fantastic and we rented out every room within the first two weeks! Could have done it on the first day, but we did some extra vetting of tenants to make sure we had a compatible group.
Next stage of this one is to convert the detached two car garage into storage units. First we'll offer them up to our tenants, and if they don't want them then we'll post it online for others looking for storage at a competitive rate.
Room 1 - 625
Room 2 - 600
Room 3 - 750 (converted garage)
Room 4 - 750 (converted living room)
Room 5 - 650
Room 6 - 650
Each room also pays a flat rate of $50/month for utilities and internet.
Got questions? Ask away!
What made you interested in investing in this type of deal?
Had a GREAT realtor who exposed us to this strategy and it has worked out exactly as intended!
How did you find this deal and how did you negotiate it?
Found it on market
How did you finance this deal?
5% down with my partners 1st time home buyer loan. He stayed in the property during the seasoning period then moved and rented the room out
How did you add value to the deal?
Conversion of garage, divided living rooms to create more rooms and added value through purpose built features for rent by room model
What was the outcome?
Excellent cashflow from a home that would have barely broken even otherwise
Lessons learned? Challenges?
Don't over do it, but don't under do it either. Nice fixtures and aesthetic things that may cost a little more go a long way when it comes time to rent it out. Tenants appreciate the nicer things and are willing to pay a bit more for many things that would otherwise be considered as unnecessary expenses, i.e. upgraded appliances, tile backsplash, etc. Things cost more and take longer than expected, but in the end it'll all be worth it.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Yes! Sherief Elbassouni is THE MAN!!! Provided great value, above and beyond what he had to and has become a great friend since!
