Check the Area
The Basics of the Deal:
“Check the Area” was purchased for 36K and listed as a 3/2 with a two car garage on an average city lot, and it was built in the mid 70’s.
We called this “Check the Area” because the house was in a zip code that I had previously avoided. The pictures of the house and the interior, the age of the house, and the price seemed too good to be true (most of the stuff I have been buying are > 50 Years old).
I wrestled with this for some time because I have rules and I follow them, but when data changes I reserve the right to change my mind. So after several nights during which I couldn’t get this house off my mind, I drove the area and, lo and behold, I found a four or five block area of newer homes kept in better than fair condition.
Expected and Initial Plan:
We initially expected the house to cost 5k-6K in repairs due to its fairly good shape. It needed some fence work, a new stove, a water heater, and blinds. We went ahead and re painted the originally bright orange trim. With the exception of the master bedroom, the house had new linoleum, so we kept it and advertised that small pets are OK. Why not turn a negative into a positive?
Given the area, we expected the rental to take 30 days and possibly need a move in special. We aimed for $995 but we would have taken $900.
Actuals:
We ended up spending just under 6K, and we actually got the unit rented for $1,025 via section 8. The tenants moved in a week after we finished the make-ready repairs.
Current Status of Property:
The first tenants have paid like clockwork, but unfortunately they just gave their 30 day notice, so we will be turning this unit. If averages hold, we should have about $700-$900 in make-ready repairs once they are out. We started advertising already and we are asking $995 again, but as stated earlier, we would gladly take $900 if we had to.
Lessons Learned:
Have rules about location, but if something pops up that looks good, go drive around the area. You never know when you might find your next area to farm. If you don’t like the looks of the area while driving, just keep going and cross it off the list. Some areas are just not worth it.
Turn a negative into a positive whenever possible. In this case, the house was 90% linoleum. We could have spent 2K+ in new carpet but instead we just advertised it as small pet friendly. The house was built for small pets as far as I can see. The best part is that we saved 2K in new carpet.
If the house has a decent paint job on it and you want to make a small change, just paint the trim, especially if the trim is orange!!!
Grade the Deal and Why:
We give this house an A, as we came in on budget and we rented the unit above our planned rate and without giving a move-in special. The house would have been an A+ if we didn’t just get a 30 day notice.
Future Plans for Property:
The property is in a solid rental area and we plan to keep it long term. In fact, we are trying to own as many houses in this neighborhood as we can in order to maintain quality.
In the mean-time, we will be looking for ways to strip off a small piece of equity via a bank line or private money, as we only owe about 16K on the property.
