Deal Review: Farm Area Again

The Basics of the Deal:

“Farm Area Again” was purchased for 38K and offered us the cleanest REO property yet.  The metal privacy fence in the front yard alone had to be worth 2K+ and will be a strong plus for future renters.

We called this “Farm Area Again” because it is the third property in the same area (See Check Area and Farm Area for other two properties).  If we can buy all the houses in this little pocket we would be very happy.

The units only need new paint, new carpet, some blinds and a small 6 foot fence on the right side of the house.  

Expected and Initial Plan:

Our original make ready estimate was 5K and we estimated that we would rent the property for $900-$950.  We expected repairs to be done in under a week and thus started advertising the day we closed.

Actuals:

We ended up spending just under 4K in repairs as the house was very clean and we found no surprises which is always a good thing.  We ended up renting the property for $900 to a nice family instead of holding out for $950.

Current Status of Property:

This property is still in what we call the seasoning period so we may yet have a surprise but to date we are very happy. We expect to hold this property for the long term as it is a solid rental and in a decent area.

Lessons Learned:

If you like an area keep looking, especially if you already have a cheap comp on the books.  I am convinced we got this very clean house for only 38K because we had 2 cheap comps in the area (Our deals:-)

When renting a house you need to balance speed with maximum rent.  This is a solid rental area but in this case we chose to focus on renting quickly instead of trying to maximize rent and having a vacancy.  We are lucky in that we have so much room for profit in these deals we can give up $50 and not really feel it.

We had a chance to work with a new agent on this deal and it is already paying off as he has brought us a couple of more listing to review.  Remember this is a people business!!!!

Grade the Deal and Why:

We give this property an A- as we came in under budget but we didn’t get our maximum rental amount. 

Future Plans for Property:

The property is in a decent area and we will keep for the long term.  We will look to extract a small sliver of equity via a bank equity line or private money loan as we only owe about 25K on the property and thus can secure a small 2nd without risking security of the property.