Hey BP community,
Proud to say I'm no longer a noob. After countless BP podcasts and browsing forums for a few years now, I finally took the plunge and bought my first property! This is intended to be a long term buy and hold. It's a 4/3 garden variety midcentury ranch in a very desirable area of north DFW where I grew up. I paid 475k 10% down with a traditional mortgage @ 2.75%. unrenovated comps are 400-550k. Not exactly a screaming deal, but what led me to shake off analysis paralysis and take the plunge was a combination of factors:
1. I wanted to leverage my W-2 and lock in a good interest rate.
2. Great neighborhood with few MLS listings as many transactions are off market. VERY few rentals so little competition
3. House had solid bones but was functionally obsolete and was languishing on the market
4. I was itching for a project and wanted to put all what I'd learned to use.
I closed on September 15 2020 and with the advice of a mentor, I GCed a complete gut job on the house to the studs. I also reconfigured most of the rooms to have an open floor plan. I really recommend RoomSketcher to do your floor plans. And the basic version is free. Framing alone took 4 weeks and involved LVL beam installation and reenforcing joists and rafters to accommodate the open floor plan. All new HVAC, insulation, electrical and plumbing including gas and sewer. Solid white oak floors, New bathrooms, new kitchen with custom shaker cabinets and high end appliances brought the total reno cost was about 135k and a TON of sweat equity on my part. I also did a few high end touches like wrapping the LVL beam in white oak, designing and building a custom feature wall with shelves and shiplap to fill up a large blank space. I even had to rebuild the fireplace so I had it done in a quirky twisted design just to be different. I reused the old kitchen cabinets and worktops in the garage which really spruced up the space. The entire project
took about 3 months and house was finished mid December.
Here are the Numbers:
My PITI payment is $3050/mo. $860 of that is principle repayment so I would need to net at least $2250/mo to cash flow. However since I put in 135k in renovations and my house was literally the only renovated house for lease in a large and desirable area, I threw it up for rent at $3900/mo on Zillow just before the holidays to see what bites I would get. This was relatively high as the few rental comps in the neighborhood were between $2200 and $2800 for dark dingy unrenovated houses. I had about 70 views a day and even did a few showings.
On Jan 6th the very day I had professional photos taken to list on MLS, an agent who specialized in luxury rentals called and said she had a client who was very interested in the house. He was relocating from the northeast for work and was looking to move with his family. I met them at the house and after viewing he said "don't show me any more houses. This is it." He submitted the application for the full $3900/mo for a year lease and while I won't go into details, he was a stellar applicant with high salary and close to 800 credit score. I ran his application by my mentor and a couple other RE investors whose opinion I trust and they said go for it.
House is now leased and cash flowing 850/mo ($1700/mo if you count principle repayment) Cash invested was 45k down payment + 5k PMI + 135k in renovations for a total of 185k. Assuming I can keep it rented at that price, that equates to a respectable 11% cash-on-cash return per year. And that is not even considering appreciation. My RE journey is only starting and who knows what could happen keeping this house rented in future. I still ask myself why is everyone only flipping in this neighborhood and not renting out? Anyway I was blown away by how well my first deal went especially considering that it wasn't that great of a "deal" in the first place. My takeaway points are:
1. Sometimes it's a good strategy to get an OK deal in a great neighborhood
2. Find a house that you can work with to make a great space. I looked at countless houses before this one spoke to me
3. It's good to be an area with little rental competition.
Here are some before and after photos. Comments welcome!
some before and after photos from the same vantage point
