Investment Info:
Single-family residence buy & hold investment.
Purchase price: $52,000
Cash invested: $52,000
Two bedroom one bath, one car garage in a now upcoming neighborhood that is attracting out of state investors, causing rising purchase prices.
Gutted the then-vacant house, replacing everything but the studs and the pier and beam foundation. Started inside, ripping out drywall and insulating, then replacing drywall, reinstalling sub-flooring and then tile in the kitchen and bath, and bamboo in all other areas, new kitchen cabinets and countertops, cut out the wall between the kitchen and living to open up the area, then put on a countertop. Once the inside was completely done, I ripped the plastic siding off and replaced the windows and shiplap siding, and painted.
Along the way, I planted a beautiful flower bed in the front, adding a few small trees and St. Augustine sod. The previous tenants had drained oil from vehicles onto the grass. I poured a few bottles of Dawn dish detergent over the next 12 months and watered it in until grass finally began to grow back.
I did all the work myself (except the new 200 Amp service) over a fourteen month period, including painting inside and outside. I have the same tenant I started with in 2014, and the interior of the house could easily be featured in a home magazine!
I used a screening service to run credit reports on potential tenants. I set the bar high on my level of expectations, sent applicants a link. They clicked on the link and entered their information and paid, and the service then sent me a report that I could make a decision on. The first applicant was a cute couple, but failed the test. She had a Social Security number that had never been issued and he had a felony conviction for credit card theft. Whew!
Then came the second applicant, who has been my sole tenant. Never a late payment, always keeps the place up. Couldn't ask for a better tenant!
What made you interested in investing in this type of deal?
I wanted to rehab this former drug house because it was two doors down from my Mother's house. It was my second deal.
How did you find this deal and how did you negotiate it?
I saw the others wife putting the sign in the ground and called the number. The owner came outside and I practically wrote the contract on the spot! I gave him a $100 bill and he agreed to hold the house. He had the attorney at his title company draw up the contract, we signed and two weeks later, it was ours.
It was cheap enough, and the owner didn't want to lower the price any lower than it already was.
How did you finance this deal?
I paid cash from savings.
How did you add value to the deal?
I gutted the house, and with the renovations and getting a good tenant in, it improves the neighborhood and the value of nearby homes.
What was the outcome?
The house has had one tenant and we've had zero problems with her. It brings in $750 cash every month and doing the work ourselves saved a ton of money, but not time. The next lease (January 2019) will increase the cash flow to $900/month.
Lessons learned? Challenges?
It was challenging doing nearly all the work myself, having no spare time to relax. It took fourteen months to complete and learned all about scope-creep. Scope-Creep is when you finish one project and decide it makes more sense to fix something else while renovating the original task, adding to the time and expense allocated for the initial project.
For example, the tile in the bathroom needed to be replaced, but while the walls were out, I put in new Pex plumbing pipe.
Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?
On this house, I had cash and worked with the owner and his title company, and the title company attorney. This was by far the simplest and least expensive way to go, in my opinion. No Realtor fees and quick closings.
I would recommend using the tenant background check website On-Site.Com. I worried about screening tenants, but have never had a bad experience since using them.
