I caught the RE investing bug

Hello BP community. I want to start off and say writing this blog scare the crap out of me. I do not feel I have anything unique to share and there is sooooooo much I do not know about this Investing thing but I am going to go ahead and document my experiences for everyone to critique anyways. So with that said I will get to how I started down the road of RE investing and my first project. 

I had rented several apartments once I graduated from high school and through my time in college but it never felt right giving my money to the complexes knowing I would not benefit from it monetarily and I would never see that money again. I had a full time job during these times but never thought I would qualify for a mortgage on a home because I didn't have thousands of dollars in the bank so I never pursued it. Luckily, I had amazing fiance (now wife) that is a saver and with her getting an amazing salaried job right out of college we were able to purchased our first house at the end of 2013 in Englewood Colorado. 

We bought the 716 sq/ft, 2bd/1ba house for $166k using a friend that was a RE agent. we had a area that we wanted to live but the houses in the area were not in the price range we could afford so she suggested we look at an area they had purchased their first home which happen to be in Englewood. It was a formal rental house and it was not updated like we wanted but it checked most of our wish list boxes and most importantly we could move into it right away and leave the in laws basement. We did a quick drive around the neighborhood and decided that since there was a new Starbucks on a corner not far from the house it may be a an up and coming area and we would put an offer on the property. As you can tell, I'd make a great Market Research Analysis! haha

Since I am fairly handy and I had many friends and family that had construction experience I thought this would be a good fixer upper and we could make it into a place that had all the items we were looking for. So we started working on the property about 6 months after we purchased it. I contacted a banker at the credit union I use after seeing an advertisement in the lobby about a HELOC. I ended up sitting down with them and our current lender to see what products were available to us. I told them I wanted to add a 2 car garage and we didn't have the money to do it so they said bring some quotes from a contractor that will build one and then we could look into options. 

We started shopping for a garage builder and ended up getting four quotes and they ranged from $17k up to $30k to pour a pad, erect the structure, bring power to the building and put in a window and door. We brought this info to the bank and they pulled a soft valuation from their system and determined we had enough equity to get a 2nd mortgage for $20k. I believe with the 2nd mortgage we were at a 80% LTV based on the ARV. So we paid for an appraisal and within 45 days we had the money in our account to start the work.

We went ahead and hired the cheapest guy based solely on price because we figured we could then take the additional money that was left over and use it to convert the existing 1 car garage into a master bedroom and landscape the backyard. The construction of the garage and backyard went as planned and there were luckily no issues to write about. 

I then took on the fun challenge of converting the garage into a bedroom after the garage was built. This consisted of researching local building codes at the local library and drawing my own plans to submit to the city permit department. I had to have a drawing for each trade which included a general building, electrical and HVAC drawings. My first draft did not get approved and I had to adjust a few items to meet the current standards. Once we had the approval it took me about a month an a half of working after work to and a lot of swear words to complete the remodel. Since the house was so old I practically had to re-frame the entire space and bring the floor up to match the rest of the house. I ended up hiring a friend to finish mudding,tapping and texturing the room along with Lowes to install carpet. The total cost of the room renovation cost us roughly $8k with me doing almost all the work. 

During this renovation my friend kept mentioning I should get my RE license and start selling houses. So I decided that sounded like a fun career and took the plunge. I ended up getting my RE license and do it part time. Just after acquiring my license I met a contractor during a meeting at my old job who mentioned I look into Bigger Pockets since I talked about flipping property as an avenue I wanted to explore since I now had my license. I left the meeting and started listening and my whole world blew up. I did not realize that normal people could make this flipping thing a real business and I wanted in!

Our first step was looking for ways to save money and cut expenses so we could buy more property. We were able to refinance and consolidate the 2nd mortgage we had into a new primary and get rid of the PMI to make out house payment the same as when we bought it but it reduced our expenses by about $1000 a month. This was all the money we were able to cut out of our monthly bills.

After listing to the podcasts and reading all the books suggested for a month or two I knew we had to do something with our house and make it an investment property. So we planed on re arranging the entire kitchen and relocating the laundry room to a office/bonus room closet that we had and then rent it out and go live with the in laws again, because Rich Dad basically says so. We ended up doing another month and a half long renovation on the kitchen, laundry area along with re flooring the whole house. Again I worked on the renovations after work and on the weekends. I would have family and friends over almost every night to assist me with the work. There was a lot of pizza and beer bought during this time.

This brings us to spring of 2016. If you were not around the Denver market at this time, things were going nuts (as they are still) and prices had been rapidly rising since we bought the property. My wife and I contemplated renting or selling it and because we would probably never see the amount from renting as we would if we were to sell it, we listed the property after two weeks of finishing the renovation. Needless to say my wife was not thrilled her brand new kitchen that she had been wanting since we moved in was not going to be hers anymore. 

The property went under contract within 9 hours of it hitting the market.  We accepted a conventional loan offer of $11k over asking price which put the sale at $320k for a now fully renovated 998 sq.ft, 2bd (1 master with walk in closet) /1ba house with an oversized 2 car garage. The out of pocket cost we had for the entire project ran roughly $11,400 ($5800 for down payment, $5000 for the room renovation, $600 landscaping) and the rest was on credit cards and the 2nd mortgage we received ($35000). We did not consider the holding costs since we lived there during all of it. I also didn't include any of my labor as costs, which should probably be taken into consideration...

In the end, this property netted us one giant check at closing, a very happy Terry and the reason I decided to try my hand at being a full time investor. It turns out they do not all happen this way, unfortunately, but I will continue to document my story in the following posts.