Author Topic: Offer just approved on new rental  (Read 1703 times)

calimom

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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

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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.

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affordablehousing

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

calimom

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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

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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

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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

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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

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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 :)

calimom

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Re: Offer just approved on new rental
« Reply #8 on: July 17, 2019, 08:17:53 PM »
Update on this proberty

We're in about Week 6 of this. Sellers removed 'most' of the possessions and junk in the house. There was a boat in the driveway - last license sticker 1996 - was finally towed away. There were 5 truckloads of additional junk from the house, an old rusty Sears shed and the cool outbuilding hauled to the dump. The Sears shed was torn down and hauled away too. There's a well for irrigation, so we've been watering the hell out of the remnants of the old orchard this property once was, a few apple trees; and the old bones hydrangea and landscape plantings. The interior of the house has been mostly painted and new LWP is placed everywhere. That took forever, but it looks good. There's a new hot water heater as well as junction box and some upgraded outlets and fixtures. We have all hardware, cabinet knobs and faucets, they're just waiting for us to install. My son and his friend are almost finished. We've mostly had fun, played music and had delicious picnic lunches while working. And yes there has been the usual snag or two.

We didn't want to show the property till it was renter ready, but some pushy prospectives wanted to see it even in its current state. I offhandedly quoted the rent as $1450 per month and they were ok with it. Their credit check is reasonable:  a teacher with SL and her artist/bartender/SAHD husband qualify. So no having to market it and hang around, which is a win as far as I can tell. We are determined to have a finish date of 8/1 and the tenants want to move in soon after. We're slightly under budget even with labor and a few unexpected expenses.

The next street over has a house with an in law unit that's been languishing at $129.5. We're interested.

waltworks

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Re: Offer just approved on new rental
« Reply #9 on: July 17, 2019, 10:15:19 PM »
How many hours would you say you collectively have into it? Sounds like you're ahead on money and rent, which is awesome.

-W

Dicey

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Re: Offer just approved on new rental
« Reply #10 on: July 18, 2019, 12:02:51 AM »
Whoa! Congratulations! I have to laugh, because it's nearly the end of July and we're still not done yet. Some of it is because a series of fuck-ups with the appliances (not our fault) keep throwing monkeywrenches into our schedule and a little bit is just shit happens. This weekend will hopefully get us across the finish line, except for the refrigerator that is being replaced some time next week. The "Coming Soon" signs are going up in a day or three. We don't have another project lined up and we hope it stays that way for a few months, lol. We need to paint our own house. The paint's been in the garage since last summer.

The good news is that a few solid comps will be closing next week, all for way the hell more than we thought we'd get for ours. None of them are completely "done", so it's going to be interesting.

monarda

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Re: Offer just approved on new rental
« Reply #11 on: July 19, 2019, 10:42:35 AM »
Congratulations! Sounds like really good progress for six weeks.
I bet the 20 miles isn't seeming too bad now. We were doing work on a property 3 hours drive away. We just camped there while we were painting.

calimom

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Re: Offer just approved on new rental
« Reply #12 on: July 19, 2019, 01:23:15 PM »
How many hours would you say you collectively have into it? Sounds like you're ahead on money and rent, which is awesome.

-W

The two teenage boys have clocked in about 130 hours. We partners come and go, but occasionally put in 7 or so hour days, some of which have been kind of fun - music, picnic lunch, etc. The only fully outsourced professional work has been to the electrician. Like a lot of people, none of us want to mess with that.

@Dicey this project is on a whole different level than your flip! What we're doing might be best referred to as a refresh, no walls knocked down, bathrooms moved or any of those things.

Overall feeling pretty good about this small investment. With good tenants, which it looks like we have found, it'll  be worth it.

Dicey

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Re: Offer just approved on new rental
« Reply #13 on: July 19, 2019, 04:45:27 PM »
@Dicey this project is on a whole different level than your flip! What we're doing might be best referred to as a refresh, no walls knocked down, bathrooms moved or any of those things.
HAHAHAHAHA! In the end, we only moved one wall out about 18", turned one existing wall into a pony wall, and widened one doorway. OTOH, we did strip it to the studs and completely re-do the electrical, including moving the entire panel. You know, just the easy stuff. Oh, and we may have moved a couple of sinks and toilets, but the bathrooms are in general, exactly where they started :-)