I hit the ground running after the Mind Snap post, looking for properties to purchase. I saw one in a great neighborhood that was 2 houses on one lot, but I waited too long to set up an appointment and missed the deadline by a day. Another property was being sold by the owner through Craigslist, but she accepted an offer the night before our appointment. I was getting annoyed with my bad luck, but finally found a place.
This is a Vacancy Bank (VB) property, so I had the VB real estate agent Muhammad show it to me. Turns out he's no longer with VB, but he knows the ins and outs of the program so he's still valuable. The area is in the Eastling section of Smalltown which is very good, and the price of $30,000 is in my range. I brought Handyman Alfonso along so that he could give me a quick estimate immediately after the showing.
This is Potential Refinance Property #1, or PRP #1, a single family home in a good neighborhood. I know I said I wanted nothing but multi-family properties, but there are advantages to single family homes that I didn't realize. Tenants tend to stay longer in single family homes. The landlord only has to deal with repairs, as tenants usually pay for the water and take care of lawn maintenance and snow removal. I still prefer two-family properties for these kind of deals, but I'll take what I can get right now. As one can see, the roof looks almost brand new, and the exterior doesn't look half bad.
There's much work to be done in the kitchen. The appliances as well as the cabinets need to be replaced. And, see that wall to the right that's above the sink (or to the left in the bottom photo)? I plan to knock a giant hole in it and frame, so that it looks out into the living room and brings in natural light. I may even put some bar stools on the other side. This is will done not only to make the kitchen look better, but appear bigger as well. Next to the kitchen is the first full bathroom with a stand-up shower.
The dining room will also need to be painted, and I may have to put up a new ceiling and get rid of that low hanging chandelier. With an almost brand-new roof, one might wonder where the hell this water damage is coming from. We found the answer upstairs.
Whoever did the roof didn't flash correctly, so water can still seep through the seams in between sections of the roof. Alfonso can flash it correctly and then patch that giant hole. This is one of the three listed bedrooms, and I realized that the bedrooms were small. It's not too big of a deal, but I know it'll turn off potential renters.
There was also an octopus furnace in the basement that I'd replace with a new one and add central air conditioning. If you're wondering why I would waste the money when the furnace works perfectly fine, you'd have to understand rentability. The kitchen and bedrooms are small as fuck. In order to turn a decent profit, I'll have to get tenants willing to pay $950 to $1,000 a month, so it makes sense to put as many amenities as possible to get that rent amount. Alfonso quoted me $2,500 in labor to do all the sheetrock, painting, and roof repair. So, let’s take a look at what I stand to profit:
Property Cost: $30,000
Labor: $3,000 (an extra $500 added just in case)
Materials: $2,000 (maybe an overestimate since I’ll be buying mostly sheetrock and paint, but overestimates are a good thing)
Appliances: $3,000 (stove, new kitchen sink w/cabinet, refrigerator)
Furnace w/Central Air conditioning: $4,000 (another overestimate, as my HVAC guys would probably do it for $3,000)
Landscaping: $200 (a few rose bushes here and there)
Windows: $3,000 (I counted 15 windows that Tyrell will replace)
Total Cost: $44,200
All of the repairs will be paid for through a rehab loan, and I’m looking for one that would give me $30,000. With repairs costing $14,200 ($44,200 minus the $30,000 purchase price), that would leave me with a rehab profit of $15,800. A refinance will go towards the value of the property, which I estimate will be between $70K and $75K. So, let’s say the place appraises for $70,000. At 90% LTV, that comes to $63,000. This would be the final profit breakdown:
$30,000 (rehab loan) - $14,200 (repair costs) + $63,000 (refinance amount) - $30,000 (pay back the rehab loan) - $30,000 (original cost of property) = $18,800.
Hmm, $18,800. Not a bad profit, but I was really looking forward to profits of $20,000 and up. Nevertheless, I liked the place and made an appointment with Muhammad to put an official offer on it Monday afternoon, but snow delayed our appointment until today. The winning offer doesn’t get announced until February, and then it takes about a month longer than usual to close since it’s a Vacancy Bank property. So, if all goes well, I should have this place by June. That could be a problem.
Right now, I have Handyman Alfonso’s undivided attention. It’s winter, and contractors don't make as much money this season as they do in warmer seasons. By the time June comes around, Alfonso will be busy and it’ll take him longer to complete repairs. So I need to get a property between now and March in order to get the best out of Alfonso now. While this deal is in process, I’ll continue to look for a rehab I can purchase while the construction business is slow.
P.S.: I missed out on a fantastic two-family selling for $20,000. The apartments had burn damage, but the exterior was PERFECT and the neighborhood was very nice.. It went up for sale and sold in just 2 days! The competition is fierce, and I have to be on my game if I'm gonna get the right property before someone else does.
Update: I went in to sign the offer, only to find out that Vacancy Bank has a list of repairs that THEY want done. TWENTY TWO pages worth! Ugh! So it's goodbye to Vacancy Bank properties, but there are plenty of fixer-uppers around that aren't associated with those assholes.
This is a Vacancy Bank (VB) property, so I had the VB real estate agent Muhammad show it to me. Turns out he's no longer with VB, but he knows the ins and outs of the program so he's still valuable. The area is in the Eastling section of Smalltown which is very good, and the price of $30,000 is in my range. I brought Handyman Alfonso along so that he could give me a quick estimate immediately after the showing.
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| Stock photo, as I forgot to take a picture. |
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| Small ass kitchen |
There's much work to be done in the kitchen. The appliances as well as the cabinets need to be replaced. And, see that wall to the right that's above the sink (or to the left in the bottom photo)? I plan to knock a giant hole in it and frame, so that it looks out into the living room and brings in natural light. I may even put some bar stools on the other side. This is will done not only to make the kitchen look better, but appear bigger as well. Next to the kitchen is the first full bathroom with a stand-up shower.
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| Another look at the kitchen. As one can see, creating a framed-out hole above the sink would bring a ton of natural light in |
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| This extra room seems out of place when there's already a front porch. |
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| Living room. Other than some paint and polyurethane, this area is solid |
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| Dining room. |
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| Water damage in the dining room |
The dining room will also need to be painted, and I may have to put up a new ceiling and get rid of that low hanging chandelier. With an almost brand-new roof, one might wonder where the hell this water damage is coming from. We found the answer upstairs.
 |
| Upstairs Bedroom. Alfonso points out the problem. |
Whoever did the roof didn't flash correctly, so water can still seep through the seams in between sections of the roof. Alfonso can flash it correctly and then patch that giant hole. This is one of the three listed bedrooms, and I realized that the bedrooms were small. It's not too big of a deal, but I know it'll turn off potential renters.
 |
| Second bathroom. Nice, and nothing really needs to be done here |
There was also an octopus furnace in the basement that I'd replace with a new one and add central air conditioning. If you're wondering why I would waste the money when the furnace works perfectly fine, you'd have to understand rentability. The kitchen and bedrooms are small as fuck. In order to turn a decent profit, I'll have to get tenants willing to pay $950 to $1,000 a month, so it makes sense to put as many amenities as possible to get that rent amount. Alfonso quoted me $2,500 in labor to do all the sheetrock, painting, and roof repair. So, let’s take a look at what I stand to profit:
Property Cost: $30,000
Labor: $3,000 (an extra $500 added just in case)
Materials: $2,000 (maybe an overestimate since I’ll be buying mostly sheetrock and paint, but overestimates are a good thing)
Appliances: $3,000 (stove, new kitchen sink w/cabinet, refrigerator)
Furnace w/Central Air conditioning: $4,000 (another overestimate, as my HVAC guys would probably do it for $3,000)
Landscaping: $200 (a few rose bushes here and there)
Windows: $3,000 (I counted 15 windows that Tyrell will replace)
Total Cost: $44,200
All of the repairs will be paid for through a rehab loan, and I’m looking for one that would give me $30,000. With repairs costing $14,200 ($44,200 minus the $30,000 purchase price), that would leave me with a rehab profit of $15,800. A refinance will go towards the value of the property, which I estimate will be between $70K and $75K. So, let’s say the place appraises for $70,000. At 90% LTV, that comes to $63,000. This would be the final profit breakdown:
$30,000 (rehab loan) - $14,200 (repair costs) + $63,000 (refinance amount) - $30,000 (pay back the rehab loan) - $30,000 (original cost of property) = $18,800.
Hmm, $18,800. Not a bad profit, but I was really looking forward to profits of $20,000 and up. Nevertheless, I liked the place and made an appointment with Muhammad to put an official offer on it Monday afternoon, but snow delayed our appointment until today. The winning offer doesn’t get announced until February, and then it takes about a month longer than usual to close since it’s a Vacancy Bank property. So, if all goes well, I should have this place by June. That could be a problem.
Right now, I have Handyman Alfonso’s undivided attention. It’s winter, and contractors don't make as much money this season as they do in warmer seasons. By the time June comes around, Alfonso will be busy and it’ll take him longer to complete repairs. So I need to get a property between now and March in order to get the best out of Alfonso now. While this deal is in process, I’ll continue to look for a rehab I can purchase while the construction business is slow.
P.S.: I missed out on a fantastic two-family selling for $20,000. The apartments had burn damage, but the exterior was PERFECT and the neighborhood was very nice.. It went up for sale and sold in just 2 days! The competition is fierce, and I have to be on my game if I'm gonna get the right property before someone else does.
Update: I went in to sign the offer, only to find out that Vacancy Bank has a list of repairs that THEY want done. TWENTY TWO pages worth! Ugh! So it's goodbye to Vacancy Bank properties, but there are plenty of fixer-uppers around that aren't associated with those assholes.
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