In July 2020, we closed on our first SFR rental during the height of Covid. We were working with an investor friendly Realtor and had been looking in Amherst New York near University at Buffalo for several months. We kept losing out to higher bidders, and all cash no contingency bidders. In May our Realtor showed us a 3 Bd 1Ba in Kenmore NY via Zoom along with several other homes. The seller was an absentee landlord asking $130K. The following day the Realtor called me to let me know there was an offer going in on the Kenmore house. I made an offer of $116K cash with no contingencies and $40K in earnest money. We went into contract for $117,500.
In June we went up to inspect the house, it’s a 7-hour drive from where I live. First lesson, video inspections are not a good substitute for in person. The house was in rougher shape than it appeared on Zoom and the stairway carpet smelt like money, dog urine. Didn’t matter, I had already put down a $40K non refundable earnest deposit and more importantly, as soon as we went into contract, I had lined up 3 tenants (college students) to begin renting in mid-August. Second lesson, closings take longer during a pandemic. We thought we would close in early July, we ended up closing July 23. I started looking for contractors about a month before closing so I could have them start right after closing. Lesson 3, in a hot market, contractors are booked several months in advance.
Good thing I’m handy. For 5 weeks I drove back and forth from NYC on weekends with either my father or a friend to help me renovate. There's nothing like a drop-dead hard deadline to help you accomplish your goals. Just like on those TV renovation shows, as my first tenant pulled into the driveway on August 22nd, I was under the sink completing the last plumbing connection. The one thing I couldn’t self-perform was repaving the driveway, which I scheduled for late September. As the weather got colder the furnace shut down a few times so I had a new one installed right before Christmas.
We used a HELOC on our primary residence to fund the whole deal with the intention of putting a first mortgage on the property after 6 months. Last month upon the suggestion of a mortgage broker and the advice from my accountant, we've decided to refi our primary residence and put the rental house in an LLC. For us, asset protection is more important.
In summary, this probably was not a neighborhood I would have looked in. The taxes are relatively high and all the houses including mine were built in the early 1900s. But, the neighbors are great and I’m glad my Realtor directed me there. Since our closing, houses in the neighbor never seem to last more than a week on the market and everything is selling at higher prices than we paid. When we did our walk through in June I put together an estimate of the cost of all repairs and I’ve stayed within budget. I still have more work to do on the property, it needs to be painted and it requires some drainage and landscaping improvements.
