Author Topic: Offer just approved on new rental  (Read 755 times)

calimom

  • Pencil Stache
  • ****
  • Posts: 864
  • Location: Northern California
Offer just approved on new rental
« on: May 03, 2019, 08:34:34 PM »
Backstory: my cousin, her husband and I have a very tiny real estate empire in an LLC. To date we co-own a duplex that we purchased during the meltdown in 2010. We rehabbed it and it cashflows well, each  receiving about $600 per month. In more recent years we've flipped a manufactured home on country property and foreclosed condo. We work well together have an annual meeting to discuss if our arrangement still works; it always does. Each of us owns separate property that we rent, them their first house and me a small commercial property I rent to my business. We have considered, looked at, and discarded the idea of buying a 4 or 5 plex. We've looked at several and decided it's not for us.

Recently an off market property opportunity came our way. It's a 3/1 SFR on a half acre. The sellers, son and daughter inheritors, want a quick cash deal and listed it for $78,000. We countered back and forth a few times and ended up with a final sale price of $72,500. The sellers need to move out/dispose of many, many things. It's in no way a hoard, but older people lived there for a long time and there's lots. of. stuff. The overall systems of this house are in solid condition.

The financials of this deal are putting in $40,000 from the LLC, cash from our previous flips that we have been holding back. And then each party of the LLC (I am half) putting in approximately $20,000 to fund the rest of the purchase price and the projected repairs. We are planning on working on this property through the summer, painting indoors and out, re-grouting tile, refinishing floors, and basic landscape upgrades. My teenage son will be working part time, along with the other partners. Already we have a potential tenant pool of incoming teachers to the town. We are estimating the rent to be between $1000 - $1100 per month.

We're moving forward and thinking this is almost a no brainer. And yet, the town where this house is located is just under 20 miles away. Envisioning many, many back and forth trips, visits to the Home Depot that's midway. It's going to be some work We will be self managing this project from rehab to rental.
« Last Edit: May 08, 2019, 07:18:47 PM by calimom »

waltworks

  • Magnum Stache
  • ******
  • Posts: 3175
Re: Offer just approved on new rental
« Reply #1 on: May 03, 2019, 10:01:46 PM »
Were you trying to ask a question? I'm too senile to figure it out.

-W

affordablehousing

  • Bristles
  • ***
  • Posts: 292
Re: Offer just approved on new rental
« Reply #2 on: May 03, 2019, 10:46:15 PM »
um yes, do this. easy peezy.

calimom

  • Pencil Stache
  • ****
  • Posts: 864
  • Location: Northern California
Re: Offer just approved on new rental
« Reply #3 on: May 04, 2019, 05:26:21 PM »
Were you trying to ask a question? I'm too senile to figure it out.

-W

I was mostly babbling! In weird pockets of the West Coast there are still deals to be had where the numbers seem to make sense.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3175
Re: Offer just approved on new rental
« Reply #4 on: May 04, 2019, 10:39:52 PM »
How are property taxes and insurance? Low end rentals get just killed with overhead in many cases.

It sounds like a lot of work, best of luck!

-W

calimom

  • Pencil Stache
  • ****
  • Posts: 864
  • Location: Northern California
Re: Offer just approved on new rental
« Reply #5 on: May 05, 2019, 09:55:27 AM »
It's a LCOL county in California, so it's tied to the original of the property, so annual taxes will be just under $500. We're still shopping insurance, it's looking like somewhere between $400 and $500. Since it's a SFH, the tenants will pay water and garbage.

Dicey

  • Walrus Stache
  • *******
  • Posts: 9742
  • Age: 61
  • Location: NorCal
Re: Offer just approved on new rental
« Reply #6 on: May 13, 2019, 11:14:51 PM »
IIRC, I think i know the general area where you are. I'd strongly consider it. However, we're in month 12 of a flip and about three weeks away from the finish line. We have taken exactly one weekend off in a year. This isn't really a side hustle, it's practically a full time job. Make sure the money you will earn is worth the time and effort it's going to cost you.

Pro Tip #1. If you're ever going to resell it, don't buy everything at Home Depot. Too easy for others to calculate what you spent.

Pro Tip #2. Buy HD discount coupons online. Batch your shopping and always use a coupon.

PT #3. Buy your supplies in advance and store them at your own home, not at a vacant property.

PT #3.5 Buy them on line on the big box site and have them hold for store pick-up. If a single item is on back order, they will save the entire lot for you until your order is complete.

PT #4. Ditto for tools. Don't leave them in an empty house.

PT #5. The internet is your friend. We've found deals that blow away HD (or Lowes) prices. But occasionally, their price is best. Very occasionally. Don't buy unless you know which is cheaper.

PT #6. Avoid making 1-item runs to HD. If you need something you haven't purchased in advance, do something else. Make those HD stops to and from the property, not in the middle of your workday.

That's all for this installment. I'm tired from working on the house. And my own house needs to be painted. Yeah, the paint is sitting in our garage, mocking us.

calimom

  • Pencil Stache
  • ****
  • Posts: 864
  • Location: Northern California
Re: Offer just approved on new rental
« Reply #7 on: May 16, 2019, 07:48:06 PM »
Thanks for all the tips, @Dicey! Some good stuff there, especially in regards to Home Depot and Lowe's. You are correct that there are better and cheaper options to both those stores with online shopping. I'm a fan of myknobs.com for cabinet hardware; shadesoflight.com for light fixtures and faucetsdirect.com for, well, faucets. The idea is a refresh without doing anything major like knocking down walls or adding a bathroom. And a few desirable but cost effective things like ceiling fans in a couple areas and cheap closet system in the larger bedroom.

A lesson learned from our duplex rental led us to believe that installing a new hot water heater prior to occupancy. You don't want a late night or weekend call from an understandably unhappy tenant.

And you're likely right about not leaving tools around during the remodeling period. This property is a diamond-in-the-rough and on a street of reasonably well maintained houses. Hopefully the neighbors will appreciate the property upgrades. Per the purchase agreement, the owners (inheritors of their mother's estate) must deliver free of personal effects. Drove by the other day and it looks like they are doing their best to comply. The old boat on a trailer in the driveway (last registered in 2004!) was being hitched to a pickup that was full of stuff. So fingers crossed there.

Good luck with your own flip, Dicey. That sounds like huge project. For the foreseeable time we're focusing on this house being a buy and hold rental.  My RE partners, along with my son and I, are looking forward to this challenge and seeing the house transform. But ask me again on a hot weekend in July when I'm yanking up stanky old shag carpet or tearing out encroaching blackberry vines and I'll be wishing I was having a relaxing afternoon at the lake :)