Farm Area
The Basics of the Deal:
“Farm Area” was purchased for 36K and it was listed as a 3/2, 1 car garage on an average city lot and was built in the mid 70’s.
We called this “Farm Area” because the house sits on the same street as the house called “Check the Area”. Truth be told it is directly across the street.
The key to this deal was after closing “Check the Area” I called the listing agents that had properties on the same street. I did this for two reasons. First to meet new agents and second to let them know I just created a 36K comp and if they were interested I would honor the same price on their listings. Neither agent had very nice things to say initially. But about 2 months later I got a call and was asked if my offer was still good. I am a man of my word so I honored the price and put another house under contract at 36K.
Expected and Initial Plan:
We initially expected the house to cost 8K in repairs as it needed the usual work. It needed some fence work, a new stove, water heater, paint and blinds. We also had to do a fair amount of trash out as there were 2 dumpster full of trash.
Given the area we expected the rental to take 30 days and possibly need a move in special. We aimed for $950 but we would have taken $850 all day long as the house was smaller than “Check the Area”.
Actuals:
We ended up spending just under 8K and we actually got the unit rented for $925. The tenants moved in two weeks after we finished the make ready repairs. We were ready to offer a move in special but didn’t have to.
Current Status of Property:
The first tenants have paid like clockwork and are still happily in the property. To date we have had no additional surprises.
Lessons Learned:
If you buy a property on a street why not buy the one across the street especially if you can get as good a deal. It is your chance to control the quality of the neighbors. I would gladly buy all the houses on the street if I had the capital and they were all for sale at my price.
Call all the agents with houses in the general area and let them know about your deal and their new comp. You never know when you might find your next deal.
If you give an agent a price and nothing material has changed honor it and don’t use their call back as a sign of weakness. That said if something has changed drastically share the change and the new price you would offer. I believe in fair and full disclosure.
Grade the Deal and Why:
We give this house an A- as we came in on budget and we rented the for the mid-point of our expectations.
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 so we can 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.
