All Forum Posts by: Jeffrey Gignac

I own 2 single family homes and live with my girlfriend who has a historically renovated condo building downtown in Danville, VA. We finally gave Air BnB hosting a shot after being a guest through Air BnB many times before. So far we have rented for 2 nights with 4 more nights booked in the upcoming week.

We knew nothing about the hosting side so just wanted to dive in and give it a try. It has been interesting but definitely worth it. Our average nightly rental is in excess of $100/ night which helps pay down a small mortgage in a heartbeat! We now have that much more savings every month to put toward more passive income, in addition to her mortgage getting paid down without cash out of our own pockets. 

We've been at it for less than a month but are excited to see what the potential is. Previously, I thought there would not be a market at all in our small rural town but I have been pleasantly shocked at how many requests we are getting. My personal goal is to have this condo booked for 15 days/ month and earn much better return than if we were using the condo for a traditional long-term tenant.

UPDATE #7:

RENOVATION COMPLETE AND TENANT SECURED!!! 

The GOOD NEWS:

A common theme throughout the Bigger Pockets podcast has been to tell people about what you do with real estate. It can lead to finding better contractors, building relationships with other investors and to help secure tenants. Without advertising my house and before the renovation was complete, an excellent potential tenant was forwarded to me by an acquaintance who knew I owned rental property from chatting at the bar. Not only did I not have to spend money advertising, but I incurred no vacancy at the end of the renovation process. This individual has already enrolled through my Cozy.co portal and has a clean credit check, background check, and income to rent ratio. I am receiving all rent payments through ACH so rent collection is automatic. Thank you BP Podcast!!

NUMBERS (Monthly):

• Purchase Price: $94,000.00 (20% down using LOC on my first rental property)
• Renovations: $23,875.60 (Entirely out of LOC mentioned above)
• ALL IN:             $117,875.60
• Rent:                $1,225 ($25/ monthly for small dog)
• Mortgage:           $494.66 (including Ins. at $615 annually and Taxes)
• Utilities:               $0.00 (tenant is responsible for utilities and yard work)
• Maintenance:      $245.00 (20% of gross rent is moved to separate bank account for                                          cap ex. monthly)
• LOC Interest: $190.00 (20% down payment and all renovation cost paid through LOC on my first rental property)
• Net:                      $295.35 or about $3,500 annually (1,225/117,875.60 = 1.04% property)

TIME TO PAY DOWN SOME DEBT WHILE I HUNT FOR THE NEXT OPPORTUNITY!!!!

UPDATE #6:

Through miscommunication with the vendor ordering the carpet, only a portion of the total carpet needed was ordered. The remainder of the carpet is set to be delivered Thanksgiving week with installation to take place the following week. The installer properly measured the carpeted area, with Lowe's not ordering the correct quantity of carpet. This has been about the only hiccup in the renovation process thus far. I was unrealistic about the turnaround time from the home, but part of the blame goes to my laziness. Alot of the odds and ends I find myself working on right now could have been completed much sooner, but work, recreation, and life have managed to jump in the way of my progress. Must stay diligent to the END!!

Remaining items to be addressed before listing this home for rental:

• Remove and replace downstairs bath vanity and medicine cabinet.
• Ensure all light switches, receptacles, and plates are uniform white throughout.
• Ensure working condition of all tubs, sinks, and faucets.
• Replace old/broken/dirty light fixtures inside and outside the house.
• Replace motion-sensor light outside back of kitchen.
• Replace/repair tube lighting in kitchen. (Buy covers for lights)
• Continue to tidy up front and back yard. (Remove leaves, ivy, other vines)

UPDATE #5:

I officially closed on this home on Friday, 8/26/2016. I am in the home stretch of renovations with things taking longer than anticipated, but not agonizingly so. The process for this house looks something like this:

Upon closing on the home, I immediately started tearing EVERYTHING out of the house that was not ultimately going to be used. This included old and broken ceiling fans, light fixtures, non-working appliances, all flooring, all electrical outlets, vanities, etc. While this was happening, my electrician had come through and completed an update on the electrical box and installed new ceiling fans. I kept hardwood flooring and trim in rooms that had it.

With tear down complete, I began identifying work that I would complete myself and work that I would need assistance from a contractor on. I tend to sub out the vast majority of the work since I work full time and primarily have nights and weekends. All of the walls and trim needed to be painted which has been happening for the past 4 weeks. New kitchen counter tops were installed after kitchen cabinets had been painted. New vinyl floor is going in the kitchen and master bathroom this week with carpet upstairs happening at the beginning of next week. Following the completion of counter tops and floors, final plumbing will occur with the installation of new vanities in both the guest and master bathrooms will take place. An HVAC repair man will also be coming as the downstairs unit will crank on but not begin blowing throughout the house. Upstairs unit works as normal.

Once these items are complete, I will be going back through the house to check for surfaces that need touch up paint from construction damage in addition to verifying all lights, outlets, switches, and appliances are up and running. I will be beefing up the structural sturdiness of the back deck off the master bedroom and resealing this structure for protection moving forward. I plan to clean up the front yard for a bit more curb appeal but it is in generally presentable condition.

This unit will fetch between $1,000 - $1,200 in monthly rents with my mortgage payment beginning in October at a total of $494.66 (PITI, 30 yr. amortization). Tenants will pay utilities and any other monthly recurring expenses associated with the property besides taxes and insurance.

I used to struggle with this much of the time with my significant other. We do not own any property together but we have since acquired more properties individually since working past this minor hiccup. 

You could say that when we first met I was borderline obsessed with real estate investing and held a vivid picture in my mind that I used to remind myself the life that I KNEW real estate investing would provide for us. Finding out what lifestyle my girlfriend wished to have in the future became the first avenue that I used to break her into the idea of real estate investing. I began helping her craft the vision of what financial freedom meant to her before we got too deep into the weeds with analyzing numbers and driving for dollars.

The second hurdle was alerting her to the reality that while I was more confident in this approach as opposed to investing in traditional asset classes, this was not a get rich quick scheme and that incremental gains over time was still the horizon I had set for myself. The idea of "being patient" was not interesting or sexy to her so I showed her a real life example. I told her my amount of expenses that I carry month in and month out compared to what I am already earning in FCF from each of my properties. I illustrated that the first step was covering those expenses with passive income to free up earned income from our jobs. Once her vision had been created, she was willing to accept the un-fun part (diving into numbers and properties) to zero in on exactly the number of properties it would take to achieve this goal. Upon realizing the financially free life was only several more properties away, it helped her become much more patient and focused at the same time.

Since all of this occurring, we have each acquired multiple additional units and are making nice headway towards our financial freedom goals.

UPDATE #4:

I am closing on this 3/2 property tomorrow, 8/25/2016. An electrician has come in to quote the upgrade of service from an old fuse box to a modern box with switches. This is quoted at $2,300 which was below budget for this line item. Electrician is scheduled for week of Labor Day. Following are steps to take during and after Electrician;

2nd Story: Pull up all existing floor coverings to determine source of floor lean. The sliding door to the deck will also be adjusted so it fits flush against the door frame and is not exposed to the outside. Flooring will be replaced upstairs and minor painting will be completed in the playroom, family room, and bedroom. Leaks in Master Bath faucet will be addressed at this time. I will probably replace this vanity as the current vanity looks trashy. 

1st Story:  Replace kitchen sink (rotted) with new sink and add garbage disposal. Fix leaky faucets and nozzles in bathroom near shower. Repaint entire downstairs more neutral gray color. Clean up and repaint/replace wood boards on porch in disrepair. Replace fan with "Outdoor" fan. Screened-in porch is structurally sound. Determine whether refrigerator works and find inexpensive replacement (potentially extra from house).

Exterior: Stabilize and treat lumber for deck of Master Bedroom. Tear down pergola due to dry rotted wood. Repaint shutters to a more acceptable color. Determine best course of action for back yard where little grass will grow.

I am quite excited to begin work on my 2nd buy-and-hold. The numbers are looking to have tons of upside with very little risk. I expect to have a tenant in this house by the end of September. Rental demand is surging in my area so finding a tenant should not prove to difficult, despite the time of year.

UPDATE #3:

No reasonable agreement could be reached for potential property mentioned above. I have gone into several more houses, none of which would really work with the model that I am comfortable with.

The next potential property on my list is a 3BR/2BA home that is a few streets away from my existing rental property. This house is currently listed at $105K, down from $115K when first listed. To get this house rent ready, I will need to refinish floors, repaint many of the rooms, and update the electrical system from knob and tube, The largest unknown is an uneven floor upstairs from an addition but there are no indications that these problems are foundations or structural in nature. Various items will be taken care of outside to clean up the appearance of use of it's yard. 

I submitted an offer for $90K and settled on a contracted price of $94K with the seller paying closing costs. Worst case scenario would entail investing $25K and having around $115K all in. This home will rent for between $1,100 and $1,200 monthly. I expect to close within a month and begin work immediately afterward. Wish me luck on my 2nd buy and hold property.

This situation turned out better than I could have ever imagined. I will be able to let my current tenant out of his lease and not miss any payments for rent. I have a lease signed with a new tenant for $1,300.00/ monthly who has also agreed to have a professional security system installed on his own dime. His income is roughly 5.5x monthly rent and he is a fellow rental property owner after having several homes as he moved for the military. He understands the importance of caring for others' property and this has instilled much confidence in me, selecting him to inhabit my home for the next year.

Even better, is he did not object to paying via automatic bank draft for on time monthly payments. This has taken one less thing off of my plate and I will make this mandatory for every property I acquire in the future. This is all being handled through Cozy.co. Old tenant happy, new tenant happy, and landlord (me) happy!! Thanks for everyone's input, @Max T., @Jordan Sand, @Jake Thomas, @Nicole A., @Kyle Hipp

@Thomas S. This unit has been rented at $1,300.00/ month starting July 1, 2016. I essentially chose the highest bidder at $1,400.00 and agreed to reduce the rent for a year to $1,300.00 since he was installing a security system in the house on his dime. The cost of the security system is going to be way higher than the $100/ month lost rent so I felt comfortable with that deal.

This tenant's income is 6.5x monthly rent with a very stable job situation. It really turned out to be the best of both worlds, a highly qualified tenant financially, and a fellow rental property owner who understands what it is like when your property is damaged by someone else. 

I am currently listing a property for $1,200.00/ monthly and have received a TON of qualified applicants that have already paid for credit/background screening. One potential tenant suggested that he be allowed to pay $1,400.00/ monthly so that he will be selected to occupy my property. Are there any violations with allowing the highest bidder to have the house as would be the case in the sale of a home??? 

I want to maximize value on the property without doing anything illegal or questionable. Your thoughts and suggestions are much appreciated.

JDG