The Story of my First Time
@Padma Mody asked this question offline but maybe the story is good enough to broadcast on the greater forum.
When I began searching for rentals, I was looking at 3-4BR properties within my school district because I think the schools draw families to my area. I used MLS and a REA because I was President of the Soccer Club and knew an agent with a great personality.
All the potential subject properties were bank owned Twin Homes (half a duplex). After a failed offer or two, I made an offer on a 4BR, 2 full baths, 2 garage, 1900 sq ft. unit. The original offer was conventional financing. The appraisal came back ineligible for loan because of a safety issue (lawn more threw a rock and put a hole in a window). The bank wouldn't allow anyone in the place to fix the "safety issue."
At that time, my budge was based on my personal savings and 401k loan (to myself). I changed the offer to $70k all cash and secured a $30k working loan from a family member.
I did much of the demo work and replaced the garage door opener. That took me six weeks and it became apparent that I should hire the rest. A general contractor replaced half the windows, part of an exterior wall & siding, the kitchen, all flooring, part of one bathroom, significant plumbing, significant electrical. Everything interior and exterior was painted including the ceiling. The furnace didn't pass inspection so I had that and a water softener installed. All-in $120k (purchase, rehab, utilities, taxes and interest).
I got the unit rented and ~6 months after original purchase, started the refinance process (that's the min time to conventionally refi). I met the appraiser there and had with me two pages of rehab expenses. The interaction was intentionally conversational and I gradually all the improvements. Eventually, he asked to see the two pages of rehab expenses I had and what I thought the property was worth. Final result was an appraisal of $155k. The loan was for about $120k (almost same as all-in cost).
Ultimately, it took about 9 months to acquire, rehab, rent and refi the property. Now, I own a $1500/mo rental with $600/mo cash-flow and got back all the original capital so I could replicate the process. In four years, that property has had three tenants but only 2 weeks of vacancy. I've replaced the microwave, upgraded washer and dryer, replaced the last two original windows and added a deck. The rent has been steady for three years. Next year I'll try to raise the rent $50.