Small Can Be GOOD
The Basics of the Deal:
“Small can be Good” was purchased for 35K and listed simply as "two very small houses on 1 large lot."
We called this “Small can be Good” because the first house (the one at the top of the picture to the left) was a 2/1 plus a small office and a detached garage. The second (bottom of the picture on the left) was a small 1/1 house with a carport.
The real twist about this property was that the houses had their own front and back yards. The lot was on the corner and there were two driveways. They have their own meters, mailboxes and defined property lines. I guarantee you that if you drove by these properties, you would assume they were on separate lots.
Expected and Initial Plan:
We initially expected the houses to cost 12K in repairs, as they needed all the basics, plus roof work and new AC units and water heaters. We expected the small house to rent for $550 and the larger house to rent for $750.
Actuals:
We ended up spending just over 11K in make-ready costs and renting the units for $575 and $775 respectively.
Current Status of Property:
We still own the property and are happy to report that the same families that moved in after we purchased it are still in the house and paying the rent. We had to perform additional plumbing work in one of the bathrooms due to a leak, but to date, that has been the only surprise.
We are looking to extract equity via a bank line or private money given the equity and cash flow level in the property.
Lessons Learned:
If you see two houses on one lot you owe yourself a look. Be careful; some of these can be nothing more than converted garages and real disasters.
People would rather rent single family homes even if they are smaller than apartments.
I’ll keep my eye out for more small-houses, (especially if I can repeat the $17,500 each).
Grade the Deal and Why:
We give these houses an A+, as we came in slightly under budget and we rented the units for more than we expected.
Future Plans for Property:
The houses are not in the best area, but with these cash flow levels we will just keep collecting the checks. We will look to extract a small sliver of equity via a bank equity line or private money loan since we only owe about 20K the houses.
