Hidden Value
The Basics of the Deal:
“Hidden Gem” was purchased for only 32k and it was a 4/2 (with the possibility of a 5th bedroom) it also had an attached carport on a nice sized lot. As you can see from the picture it desperately needed an exterior paint job. The real story of this property is it sits behind a similar property with a driveway easement. This house looks like the mirrored copy of the front unit.
Given the fact that the property wasn’t visible from street and that it required an easement for the driveway drove most buyers and investors away. I suspect almost no investors bothered to even go inside based on the negatives from the street. But what they were missing was the ease of creating a 5th bedroom and the ability to create a park like setting with a new fence.
Expected and Initial Plan:
We estimated about only 5K in repairs because the inside was very clean and only needed to be cleaned. We expected $995 rent and given the size and privacy of the fence that it would be perfect for a large family.
Actuals:
We ended up spending about 7K in repairs as we built a longer fence than originally planned. We not only built a 20 foot fence left to right be we also built the fence the full length of the property to hide dogs from the neighbor’s property.
We got full rental value of $995 and actually had the property rented before the repairs were completed.
The fifth bedroom and park like backyard was a huge selling point to the large family who now is paying like clockwork.
Current Status of Property:
The property is a true keeper and I am sure the tenants will be there for a long time as the kids love the backyard and the house offers enough space for all of them.
Lessons Learned:
Just because a property is not a straight forward property doesn’t mean you can’t make a solid rental house assuming you buy it at the correct price.
Knowing what will attract tenants to the house will insure success. This unit was destined for a large family and thus adding all the fencing for security and a private backyard was a huge value add.
If a house looks ugly from the outside doesn’t mean the inside has to be in bad shape. This house required less than 1K in repair costs inside outside of the framing a 5th bedroom.
Grade the Deal and Why:
We give this house an A. We spent a little extra on fencing, got our expected rental rate and to date there has been no extra surprises. We would buy this house over and over again.
Future Plans for Property:
We will hold this property long term as it is a real keeper and is destined to be a long term rental. We will look to extract a small sliver of equity via a bank line of credit or a private investor as we only owe around 15K on the property.
