Just starting out, found a deal I couldnt refuse!
All,
I am brand new to investing in real estate besides having already invested in my own home.
About a week ago, I was looking to buy some extra land near my home and prices for an acre of land was astounding for my area, i thought... The price for 1 acre of land without electric, water, sewer...just land was $4500-$4900 for all wooded acreage. I thought that was a bit steep and considering I was wanting about 10 acres, I felt the need to search via other sources. I called a local real estate agent to see what they have as far as land goes. He claimed they had a couple properties in my price range but didnt fit my description. One of which was the deal I could not refuse... Surprisingly the property was just listed 2 days ago, but had not hit the websites yet. A woman from Las Vegas, Nevada had owned the property for several years, but does not visit any longer and was wanting to part with it (probably due to tax purposes, etc).
The property consists of a small single family house, a decent outside 2 story shed, a old chicken coop (will be tore down), and about 0.5 acres of land for a whopping price of $18,500. At first, when the real estate agent mentioned it, I had assumed the house was run down with a gaping hole in the floor or something. Later, I reflected back, and had wondered exactly what the property actually looked like. I knew where the property was and after confirming with the real estate agent, I took a look. The property was grown up and looked like a hay field with a house on it that needed at least a paint job (no one has lived in the house since 1987). I took a look inside and it needed work (which I was expecting), but not too much work. It was more or less a ruby in the rough (not a diamond), but it could profit significantly.
To shed more light on the condition of the house; it desperately needed a paint job, and landscaping on the outside. The inside had some low ceilings (about 6.5-7 feet high (easy to paint!), old laminate flooring and carpeting that needed to be removed. However under that laminate and carpeting was cedar and pine floors! The cedar and pine was never finished and was in immaculate condition! There were no appliances other than an old camper stove and a hot water heater that needed to be replaced anyway. In the kitchen, old metal and wooden cabinets needed to be removed and replaced, including the kitchen sink. The carpet in the living room was not in bad condition, but considering there were pine floors underneath (why in the world would they cover that? Cold on the feet?) Due to the outside growth over the years, there was an over grown bush that was intruding into the living room window. It just needs cut and pulled out. Luckily it didnt break any windows. The bathroom consisted of the hot water heater, sink, old cast iron bathtub (like 400lbs worth), and toilet all of which needed to be replaced. The upstairs needs carpet...Old blue steps lead up and the entire floor upstairs is painted blue...This is lead paint which im not sanding or adding the expense of painting over except for on the side walls above the stairs. Besides carpeting, the upstairs just needs a paint job on the ceiling and walls. The floors were solid throughout the whole house, the foundation was solid, and there was no indication of pests tearing up the place.
Later, after I got back home, I called the Realtor, and told him I was interested in the house but needed an estimate on fixing it up. He said, he was researching the deed and saw there was another piece of land that was attached to that property. Of course, the first question I asked was "how much does she want for it?" He said, "She want $12,500 for that 3/4 acre." Keep in mind, this is 3/4 of an acre in town limits which consists of a hill which over looks the town and has a beautiful mountainous view...However, it's wooded. Clear-cut grassy land of equal acreage goes for $20,000 in the area. I asked if she would accept $6000 considering I am also purchasing the house. She accepted!!
The Realtor allowed me to sign some papers so I did not lose the property for the time I needed to get the estimate. That day, I called a local builder who does good work for relatively low prices (he owns his own equipment outright and gets outstanding deductions on appliances, and building materials). I met up with him a couple days later, and took a tour through the house and the wooded lot behind the house. He was thoughly impressed with the condition-cost ratio. He was expecting something similar to what I was expecting when first looking at the house. A few days later he got back with me for an estimate of $9000.
His estimate included everything I wanted to do to the house. I told him I will do the refinishing of the floors and painting but everything else, I would like him to do. On the outside of the house, he will tear down a walk out porch (just an eyesore), but will leave the concrete slab and do a slate patio. He will tear down a side shed that is connected to the house in order to extend the small kitchen (that storage shed was an eyesore as well), and he will put vinyl siding on the house. The 2 story shed will remain and the chicken coop will be removed, and the upper lot will be completely clear cut (he will be seeing if the local lumber mill will accept the wood for a return).
On the inside, the kitchen will need its cabinets and sink replaced, the laminate flooring tore up, and will need all of its appliances. The living room will just need its carpet removed but the bathroom will need everything including the sink, tub/shower combo, hot water heater, maybe a washer and dryer (unless I can find somewhere else to put it), and tile flooring. The upstairs, as I mentioned before, needs carpet only.
I foresee a decent profit emitting from this transaction! Estimated cost of spending on the house and yard around it is $28,000 conservatively (omitting the cost of clear-cutting the separate lot). I plan on listing the house at $50000-$60000. Similar houses with less land are being listed at $80000-$90000 with less land, but I want to move quick! Oh, and that other lot I purchased, that will be a separate transaction. I will invest roughly $8500 on the lot and will list it at about $19000 (willing to set on it for a little while considering the profit I will hopefully make on the other listing).
Feedback is greatly appreciated! Anything you see I may have done wrong, please let me know! This transaction has got me rattled to start in real estate. I have a good paying job (work for the oil and gas industry as a geologist but rarely have time off). Im looking to profit and reinvest through 1031 and slowly move up the ladder of success.
Thanks for reading and please respond with feedback/comments