Subscribe Feed (RSS)Getting Started: Our First Rent House Purchase
December 5th, 2007 by Connie | Filed under Rehab, getting started, real estate.
We paid 83K for this 3/2/2 in 2004 with nothing but our good credit rating, an 80/20 loan, and a handful of credit cards. We borrowed enough to pay closing costs from family until our income tax refund came back.
Everyone’s got to start somewhere. I’ve hesitated to show our first purchase because the before pictures are gone-with-the-wind and its hard to imagine how truly hideous this place really was without a visual. The owner inherited the house and lived for years without working plumbing, without ac/heat and without paying taxes. The walls were sherbet green. The clashing green, builder-grade carpet had never met a vacuum, much less a cleaning. Fiberboard cabinets in the kitchen and bathrooms had disintegrated years before and literally hung off the walls at odd angles.
Much worse than any dirt were the signs of violence– exterior doors kicked in, holes in the sheetrock and interior doors at fist level. Books in the closet were truly upsetting (printing the titles would probably get us flagged by various government agencies that I’d just as soon avoid.) Family photos left on the wall showed smiling mom, smiling dad and smiling children. The juxtaposition of photos and evidence of repeated violence was scary.
Mr. Brz and child-units worked every available day for 6 months to complete repairs. On May 30, the family declared the house finished and we celebrated. Around the table that night, I heard a steady chorus of ‘if I never set foot in that house again, it’ll be too soon.’
On May 31st, a massive oak tree destroyed the trailer we’d lived in for 7 years. Friends arrived on June 1st and moved us into what was intended to be our first rent house in one afternoon. We were very thankful that night 
What We Did
Sweetened condensed version:
- Everything behind the sheetrock was okay– wiring, plumbing, windows, brick
- Everything visible outside the sheetrock had to be rebuilt or replaced– cabinets, counters, faucets, flooring, sinks, toilets, tubs, light fixtures, ceiling fans, air conditioner, heater, and appliances.
Big backyard: I spent most of the 18 months we lived in this house sitting under the far tree and thanking the good Lord we had a place to go. Real estate investment was literally a safe harbor–a cushion in a time of crisis.
We found a local carpenter who built these solid oak cabinets for less than the cost of prefab. We saved by finishing them ourselves. The laminate counters sweep up the wall to form the backsplash.
The mister installed these pedestal sinks ($110 at HDepot) and beadboard paneling in both bathrooms. It was an economical solution that prospective tenant see as an upgrade.
Ceramic tile throughout makes the house feel larger than 1550 sq. ft. It’s also a breeze to clean between tenants.
As soon as we moved in, we refinanced using OO (owner occupied) financing. The house appraised for $120K. We were able to roll in closing costs and avoid PMI. With the new, lower interest rate our note was reduced by over $100 /month. Today this house rents for $1150, has positive cashflow of $400/month and recently appraised for $130K.
Sweet
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Tags: getting started in real estate, real estate investment, Rehab, rent house
What a wonderful success story story all around. What a blessing that house has been to your family. It makes for a wonderful story. I will tell my children the story of how you all had to move into it and were thankful you had done all the work to it. : )
Have a wonderful day!
Well, Connie, this one looks like a peach. I’ve certainly done the “everything outside of sheetrock” rehab (and occasionally some of the stuff behind the sheetrock too). Although I have to say, most of the properties Rob and I have bought over the past couple of years have been a lighter load on the rehab effort. I think it’s the lack of “child-unit” workers. I’ve never incorporated them in the rehab process and can see the saving potential.
The opportunity to get owner occupied financing must have been a nice boost to cashflow. Did you pull cash out at that stage or simply refinance the original balance?
So how much did you end up spending on the rehab, or do you remember? Great story, thanks for sharing.
Hey Mike
No, we didn’t… can’t remember exactly why. I think it was the higher interest rate on a cash-out refi and at that point, the focus was lowering the monthly payment. When the tree destroyed the trailer, we got enough from insurance to pay off the credit cards used during rehab so it wasn’t really necessary.
SDC– You have just hit upon the second reason for not showing this house. Ha!
I don’t remember, but I can find out.
Two things are certain: We saved a bunch by doing most of the work and we went over-budget. By the time we figured in carrying costs, it became certain that if we’d hired everything out, we could’ve done the same or better. I’ll find the records and post an update asap
Maria– don’t want to leave you out~!
You’re always so sweet to come by and offer encouragement and I just want to let you know how much its appreciated.
[…] Breakdown of Expenses Posted in December 6th, 2007 by Connie in getting started, real estate This first purchase tossed us way outside our comfort […]
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Carpet Boy…
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