I think it’s finally time to talk about the recently acquired Property 4. I’ll split this up into three posts—the purchase, the renovation, and finally the rent-out.
I spent the first 3 months of the year looking for a property to purchase. My hopes were to find one in the $30,000 - $35,000 range, but other investors constantly beat me to the punch. In total, I think I lost the bid on at least 5 properties. Discouraged, I decided to try something different.
Property 4 was listed at $45,000. Based on my previous lost bids, I knew that everyone was waiting for the price to drop to $40,000. Not wanting to miss out on yet another bid, I decided to put in a bid of exactly $45,000. After all, I had estimated the repairs to be $8,000, and I would make the difference up through the rents anyway. So I went ahead and bought it for the listed price, nothing lower.
Two days before closing, I decided to check out the property on the county website. To my surprise, there was an $1,800 delinquent tax bill that hadn’t been paid. I quickly contacted my lawyer Marvin Wassle, and he said that I have to pay it since the contract is already written up and it stated that the seller would not be responsible for delinquent taxes. Shit. With Marvin’s $1,200 bill, I ended up paying a total of $48,000 to purchase Property 4.
Before I started renovations, I decided to go to the tax department to not only pay the delinquent bill, but to also dispute the property taxes they expected me to pay. The city of Smalltown wanted me to pay over $4,000 in annual taxes for a property that’s not even rentable in its condition. The tax assessor came over, looked at both the exterior and interior, and then had me sign some documents. Instead of paying over $4,000, I’ll be paying less than $2,000. I’m sure the taxes will gradually rise as time goes on, but that savings will definitely come in handy.
So, what did I learn from my purchase? The first is to do my due diligence. Had I researched information on the property before signing the contract, I would have seen the $1,800 and could have tried to negotiate a deal. And, even if the seller became adamant about me paying the delinquent bill, I could have subtracted the taxes from my bid, making it a $43,200 offer instead of $45,000. The other lesson is to be patient. Two weeks after I signed the contract, I saw the perfect property listed on sale for $35,000. It needed about as much repair as Property 4, the neighborhood was slightly better, and the assessed value was $84,000, roughly $5,000 higher than Property 4.
Nevertheless, I was glad that I finally had SOMETHING. The next step was renovations...
I spent the first 3 months of the year looking for a property to purchase. My hopes were to find one in the $30,000 - $35,000 range, but other investors constantly beat me to the punch. In total, I think I lost the bid on at least 5 properties. Discouraged, I decided to try something different.
Property 4 was listed at $45,000. Based on my previous lost bids, I knew that everyone was waiting for the price to drop to $40,000. Not wanting to miss out on yet another bid, I decided to put in a bid of exactly $45,000. After all, I had estimated the repairs to be $8,000, and I would make the difference up through the rents anyway. So I went ahead and bought it for the listed price, nothing lower.
Two days before closing, I decided to check out the property on the county website. To my surprise, there was an $1,800 delinquent tax bill that hadn’t been paid. I quickly contacted my lawyer Marvin Wassle, and he said that I have to pay it since the contract is already written up and it stated that the seller would not be responsible for delinquent taxes. Shit. With Marvin’s $1,200 bill, I ended up paying a total of $48,000 to purchase Property 4.
Before I started renovations, I decided to go to the tax department to not only pay the delinquent bill, but to also dispute the property taxes they expected me to pay. The city of Smalltown wanted me to pay over $4,000 in annual taxes for a property that’s not even rentable in its condition. The tax assessor came over, looked at both the exterior and interior, and then had me sign some documents. Instead of paying over $4,000, I’ll be paying less than $2,000. I’m sure the taxes will gradually rise as time goes on, but that savings will definitely come in handy.
So, what did I learn from my purchase? The first is to do my due diligence. Had I researched information on the property before signing the contract, I would have seen the $1,800 and could have tried to negotiate a deal. And, even if the seller became adamant about me paying the delinquent bill, I could have subtracted the taxes from my bid, making it a $43,200 offer instead of $45,000. The other lesson is to be patient. Two weeks after I signed the contract, I saw the perfect property listed on sale for $35,000. It needed about as much repair as Property 4, the neighborhood was slightly better, and the assessed value was $84,000, roughly $5,000 higher than Property 4.
Nevertheless, I was glad that I finally had SOMETHING. The next step was renovations...
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