My apologies for going radio silent, but last week my wife and I were vacationing with her family in Florida and I tried my best to stay away from any form of electronics. The best thing, aside from the R&R, was we closed on our latest rental property! Woo!
What struck me the most during the latest walk-through was the volume of personal belongings left in the house – clothing, shoes, a used toothbrush, partially filled coffee cup, paperwork, unused spices in the kitchen and even an old pair of pantyhose that were drying in the shower. The home smelled of moth balls and vermouth. What should be clear by now is that we purchased this home from an estate. These were all things I overlooked when we first walked through the property – I was too focused on the foundation, electrical panel, leaky basement walls and nearly collapsed garage.
As I was cleaning out all of the personal belongings, I began wondering what the previous owner was like. There wasn’t much to go by, but here is what I could deduce:
An old Italian woman, Mary, lived in the home since 1973. She was the president of the local chapter of the Order of Italian Sons & Daughters. From what I could gather from all Mary’s belongings, she organized fundraisers for the local chapter, was an avid cooker and a presumably a heavy smoker considering all of the ash trays (15+) I found. Her husband passed away many years ago, but she kept pictures throughout the house.
As I was cleaning out all of the belongs (it was mildly depressing), I couldn’t help but look through some of her paperwork. In her desk drawer I found 38 beautiful prayer cards – probably from the funerals of all her friends that passed over the years. 38! Some were young, but most were old like Mary. I wonder if she was the last of her friends to go? It puts all of those part arguments you may have had with friends into perspective.
Anyways, that was my 15 minutes of emotion. The house is now clear of clutter and ready for rehab. Let the fun begin!
We should formally close on our latest investment property within the next week. We’re trying to move as quickly as possible, but as we’ve come to realize over the last several months the process doesn’t always go smoothly. There are a few liens on the property that need to be sorted out, but we’re hopeful they will be squared away.
In the interest of being ready to begin rehab on Day 1, we’re meeting with our contractor this weekend to discuss what work needs to be done. Aside from paint, a new garage, waterproofing and other mundane items, the house is in need of an updated kitchen.
Could I keep the existing cabinets and rent the property as is? Yeah, most likely. However, my mentor has showed me a fully renovated kitchen can drive a 10-15% increase in rents — at that rate, the cabinets will pay for themselves in less than a year. Aside from the monetary benefits, such renovations attract a more quality tenant, support higher appraised values and, in general, are a positive for the community.
We’ll likely tinker around with the layout to better accommodate appliances, but for now we’re trying to decide on which style to use. Our options are below – what are your thoughts? I’m leaning towards the first option, but with a different flooring / backsplash combination.
Last week I wrote about how I adjusted my strategy to better compete with professional investors. Well, it seems as though it’s worked! My very patient Realtor send me a one line email this morning that read, “Congratulations we have a deal! I will have a signed contract back to you today!”
My response? “Well, I guess we should go check out the property to see what I’ve gotten myself into!”
The property in question is located in a working class suburb with a decent school system. I know the area well as I lived just a few blocks away until I was six. It’s not the most ideal neighborhood to flip as property values have not recovered materially since the real estate crash, so we intend to rent this one out.
Since I haven’t walked through the property, fingers crossed the rehab is only cosmetic.
Photos after the jump. You say dingy, I say opportunity 🙂
Seller recently updated the siding. Cute!
Cabinets were recently updated, but I’m not a fan of the color. Replace or stain?
Cute built ins! Carpet has to go!
Ugly now, but looks promising!
For the last several months, my process has been such that I would look for properties on Zillow or the local MLS Mon-Fri and have my Realtor schedule showings on Saturday or Sunday. Of the 5-7 properties we’d see most weekends, 2-3 would fit my acquisition / rehab criteria. From that short-list, I’d submit a bid on the best candidate – all cash, 5 day contingency – and then wait to hear back. More often then not, I’d get the following response from the selling Realtor: “We received your offer and Seller has it. There is another offer on the table from another Realtor.” Well damn. I’m now the backup offer. And since the other investor ahead of me is likely a Pro, it’s unlikely that the deal will fall through. From there, I’d place a bid on the #2 property on my list. Same thing…too slow. Then #3 on the list. Same thing…too slow. See a pattern?
Rita Mae Brown noted in her novel Sudden Death that, “Insanity is doing the same thing over and over again, but expecting different results.” Too true – this whole process has driven me insane over the last several weeks. So, new strategy! Bid first, ask questions later.
I’ve seen enough properties over the last several months to know what a property at a certain price point should look like. Not only that, but most Cleveland suburbs require pre-sale inspections which list any major updates / fixes that need to be made within six months of title transfer. Between the two, I have a good sense of what I’m getting into.
So, in the interest of not perpetuating my insanity, I just sent my Realtor bids on two properties. If the talks go well, I’ll go see the properties. If not, I’ll submit more bids. All told, I currently have three bids outstanding. Here they are: