Investment Info:
Single-family, 2/2 ~1400 sq ft, mid-century ranch style home outside of Tallahassee, FL. This was our first investement.
Purchase price: $60,000
Cash invested: $55,000
What made you interested in investing in this type of deal?
Wife and I were interested in purchasing a property, learning how to do some of the fix-ups ourselves, and eventually rent it out.
How did you find this deal and how did you negotiate it?
We had actually just moved to a small town for a job I took so we had a ton of saved properties in our Zillow and Realtor lists. We were still getting settled in the new house when we saw the price on this one drop from $125,000 to $90,000. It had been steadily dropping for almost a year. We put in an offer at $90,000 and after the inspection realized that there had been a good amount of deferred maintenance. We wrote up what we thought were the big issues and offered $60,000. They accepted.
How did you finance this deal?
Personal money.
How did you add value to the deal?
We were so naive when we created our first list of fixes as it fell far short of what was really needed. Here's what we ended up doing: new roof, new hvac, new counters, opened a wall, closed a wall, created a third bedroom, new floors throughout, new paint throughout, updated electrical, one essentially remodeled master bathroom, repaired/painted original wood windows, replaced wood window in the guest shower (why?!) with a vinyl window, some exterior painting, small-scale landscaping.
What was the outcome?
We appraised at $152,000. Currently finishing up a cash out refi at 70%, 30 years at 4.6% and renters will be in start of next month at $1050/month.
Lessons learned? Challenges?
Everything. We thought we'd do a lot of it ourselves and we both work a ton at day jobs. Luckily, this house was right down the street from ours so we could pop over and work here and there. But, that has huge drawbacks as things take forever, you're tired, you're learning on the go. We initially talked to a few GC's with really wildly varying results and estimates that we thought were ridiculous. Looking back, they weren't so ridiculous,but I learned how to better assess estimates as we put in blood, sweat, and tears ourselves so that was worth it. Things dragged on and what we thought would be simple got bigger and bigger, as did our rehab estimate (we initially thought $20,000-fools). We met a local handyman who was able to really help us out, did great work, and would help educate us. Not for free, of course, but we were up front about wanting to learn things and he'd have us come up while he was finishing something and he'd go over a piece of the work we wanted to do, told us what to buy, told us how to it right, and he got paid hourly for his time. As things started taking longer we did hire out some of the bigger jobs our handyman couldn't take on and this is one of the biggest things I learned: getting it done fast, saving yourself time and moving the project forward is invaluable. Next time, I'm going to put more effort up front in working with a GC to get things moving. I've learned that I can probably save the most money in demo work myself after I talk with a GC. They can point out what needs to get done and I can just go knock it out and prep if for the team to get in and get the thing done. Another big lesson of course is in rehab budgeting-that's a place I need to up my skills and I'm working on that.
But the lessons we learned were worth it. My wife, who was wary about everything I was yakking about that I heard on Bigger Pockets, saw the big picture and how we could keep using and reusing this money she got hooked, so now I've got a partner for future endeavors.
Lastly, we live in a small town and this house had been sitting vacant for a while. When we moved in everyone knew who we were the first week before we'd even gone anywhere. When we purchased this house, everyone knew and wondered what we'd do (lots of houses here need love and some of the landlords around town do zero upkeep). Well, when the (now) renters came to check the place out we had a little contingent of folks show up to see it as well. The one renter's mother lived down the street and the other had an aunt at the local antique store and I guess word got around. They loved the place and it felt so good for people who knew what it looked like before say how much they appreciated the work we put into the house and how it was great for the neighborhood. We took the opportunity to tell them we were ready for the next project and to let folks know we're looking. No doubt the whole town knows now which is fantastic.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
Our agent, Jason Boon, Coldwell Banker Hartung and Noblin, Inc. was great. Knows Tallahassee and the surrounding area backwards and forwards. We used him on our home search which was for a historic home. He brought a great deal of knowledge to the table in helping us and we looked extensively. Great guy. So, when we found this property we called him up and asked him to help us out on it.
