Deal #2 - An unexpected complete rehab, but valuable lesson

September of 2014 I found a 2 bedroom 1 bath house that I was interested in purchasing for a rental. This particular house was in IL and had just about every problem imaginable. When the property first listed, it listed for $54,900. After 2 months on the market, the price had dropped to roughly $42,000, and I was able to get the 900 square foot home with a 1 car garage for right around $30,000.

Since I live in Las Vegas, I knew it was going to be tough to tackle this project on my own, and I already had a partner lined up. The partner is a close friend whom I've known for 10+ years. The final deal that we arranged was that he would kind of be the "project manager" in exchange for 10% of the property if and when we sell, in addition he will receive 10% of the yearly profits from this house.

Both of us definitely put in our fair share of "sweat equity" into this place. The basement had a bathroom and bedroom that were not up to code, there were trees that needed to be cut down and removed, the house was filled with cat urine covered carpet, all of the electrical needed to be updated, there was foundation issues, all new plumbing (since there was no shower), a new furnace, and the kitchen ended up being a complete rehab.

I put roughly $29,000 into this place and A LOT of time. The $29,000 includes all the work, taxes, utilities, permits, and supplies.

The property is now renting for $825/month, and its estimated value is between $75,000 - $80,000. I definitely put more money into the house than anticipated and everything that could have gone wrong pretty much did. Luckily, I had plenty of contingencies into my initial estimates, and I used every last one of them.

However, that being said, I learned a ton, and I'm glad I learned them on a smaller project.  It just made both of us more knowledgable in almost every aspect of single family homes.  I was tentative to jump into an older home (this was built in 1940) with a ton of surprises ahead, but I'm glad that I dove in head first.  I'd much rather tackle all of these issues on a 900 sq ft house, then when I purchase my first multifamily!

I've included some before and after pictures that I took.

Rental property #3 is in the works, and hopefully our offer gets accepted.  If it does, we'll have just as much work cut out for us, but we'll be able to manage our time and resources much better this time around.