The first quarter of 2018 was pretty hectic. There was so much to be learned from the deals I did. Now, I’m taking some time to reflect on them. Hopefully other real estate investors will get some value from my deal experience. I’m including the real numbers because I always find that helpful. Let me know if you like this type of post, and I’ll write one every quarter.
3/1 in Hueytown
I found this home as a FSBO on Zillow. The asking price was 52k. Before visiting, I checked local rents. I felt confident I could get $700 per month. I was looking for at least 2% of the purchase price in monthly rent. The house was in great shape. It had been listed with multiple agents, with no success. The neighborhood is in a good school district, and is pretty well kept. I offered 33k and it was accepted. In fact, the owner gave me the keys before leaving that day. I know she was happy I could take it off her hands. This closed a difficult chapter in her life.
There was really no rehab to do. I had the home cleaned and changed out the dining room light fixture. It rented for $700 per month within two weeks of marketing the property. Also, the appraisal came back at 50k. This deal actually closed near the end of 2017, but I didn’t do anything with it until the start of the year.
Key Lesson: Have a plan to get to work as soon as you close. Time is money, and I wasted a lot of time getting this one rented.
2/1 in Forrestdale
This home was found through a terrific local wholesaler. He got it to us for 28k. I wasn’t familiar with this area, but after doing some driving I got comfortable. When I go to a new part of town I try to schedule myself showings at a couple local listings to get a feel for the area. I thought I may be able to turn this into a 3/1, but it would cost more than I wanted to invest. This home still didn’t need much to be rent ready.
I spent about $1500 in rehab. We insulated the enclosed carport, patched drywall, and fixed some “handyman” wiring. This home rented for $750 per month within about two weeks of marketing. I’m confident it will appraise for 50k.
Key Lesson: I think there’s opportunity in 2/1’s. Most hedge funds and turnkey providers don’t buy 2/1’s. I think this presents an opportunity for locals to buy them at a true discount.
Skyview Package
This was a package of 4 condominiums. All 1 bedroom. The complex is fantastic. It’s got a pool and gated security. I found the deal through a BiggerPockets posting. When I met the owner for a showing, it was the first time he had seen 2 of the units. They were tax and HOA foreclosures. He’d just won a suit against the HOA for possession. At first, the lack of clear title made me hesitate. I spent every spare minute of the next two weeks doing due diligence on the condos, the HOA, and tax laws. Somehow, I convinced myself to buy them. The cost for all four was 58k. They were all vacant and in need of varying levels of repair. This was a significant project for me.
I got to work the same day I closed. Immediately, I marketed one unit for rent, and one unit for sale. Then, I started repairing the two units that were closest to rent ready. One rented for $700 and one rented for $625. The unit that needed the most work was sold to another landlord for 16k. I’ve got one unit left that needs about 2k in renovations. When completed, it should rent for $650. Once title is cleared, my remaining three units should be worth about 90k.
Key Lesson: Pushing your comfort level is they key to making more money. I had to really stretch myself to get comfortable with this deal.
Whats Ahead?
My goal is to end the year with 20 stabilized rentals. We have 5 currently rented. By the end of May it should be 7, with another 2-3 coming in June. The ones I have under contract are going to involve more rehab, so effectively managing those will be essential.
I’m also changing the way I finance deals. Going forward, I’ll be transitioning to private lenders for acquisition. Then, using blanket mortgages to finance the portfolio longer term.
The second quarter is already shaping up to be a busy one!
Thanks for reading! Comment here or on Facebook with any good deal stories you have!
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