Surprise-Surprise
The Basics of the Deal:
“Surprise-Surprise” was purchased for 38K and listed as a 4/2, measuring over 1,200 square feet in a decent area on an average city lot.
We called it “Surprise-Surprise” because we submitted an admittedly low offer expecting a counter. After 10 days and no response, we had already moved on to other properties. Late Friday afternoon, our agent called us and asked, "Are you sitting down?" I told him I was. He said, "Congrats, you just bought the house for 38K!" I had to ask which one because I had already forgotten.
Expected and Initial Plan:
We initially expected the house to cost 8K-10K in make-ready repairs. As it needed the basics inside and seriously in need of an exterior paint job. The picture to the right was actually a before shot. As you can see, we needed to address the curb appeal immediately.
We expected the house to rent for between $1,000 and $1,100 once work was complete.
Actuals:
We ended up spending just over 8k and we rented it for $1,050 a month within a week of completing the make-ready work.
Current Status of Property:
We still own the property and are happy to report that the same family that moved in after we purchased it is still in the house and paying the rent. To date, we have had no real surprises or large expenses, and the tenant has only been late once and has paid like clockwork outside of that one occasion.
Lessons Learned:
When in doubt, address the curb appeal of the house because most tenants will make up their mind while driving by. If it looks like a dump from the street, chances are good that they will never go inside.
We believe in this so much that we almost always start our repairs by addressing curb appeal first, because we need people to stop by and look and this is the fastest way to show people we are working on delivering a quality product.
You never know when a gift deal will fall in your lap. I have often thought the asset manager got word from their boss that said "Get one more of these files off your desk before the end of the day." So they looked at our offer, which, while very low had no contingencies, was all cash and we had a track record with the agent around closing and boom, we got the deal.
Grade the Deal and Why:
We give this house an A as we came in on budget and rented the unit at our expected rental rates, and the original tenants are still in the property. We have absolutely no complaints on this deal!
Future Plans for Property:
The property is bringing in solid cash flow, so we plan to hold this property long term. When the property goes back to replacement cost of 125K-150K, we may look at performing a 1031 exchange to move our equity into multifamily properties.
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 20K on the property.
