First REI under contract! (Raleigh, NC)

18 Replies

Hey everyone!

Thanks to BP and various books, etc., I have my (hopefully) my first investment property under contract!

It's just a 3/2 1450sqft single family home 30 minutes from Raleigh, NC. Purchase price of the home is ~75K and it needs ~15K worth of renovations/updates (it's mostly cosmetic, but the house is a nicely built brick home that has a new-ish roof and HVAC, so I want to do the cosmetic stuff right the first time!). Hoping to be in ~95K on the property in the end and rent it for about $1100/month. 

I found the property on Trulia, and the sale method was an auction site: Hubzu.com.. if anyone has any questions about those things I'd be glad to answer them!

I was wondering if anyone had any advice about the renovations..finding a renter, and mostly, going forward with refinancing/looking for more properties. Thanks so much!

@Dave Hurt


Thanks man! Here's to many more, hope it all goes smoothly.. I want to be one of those "lucky" first time buyers. :P

I'm really interested in your experience with Hubzu.  I buy and hold rentals, mostly through scouring the area and knowing what I"m looking for (and now I'm an agent so it makes scouring easier as well as getting in to see when I want), and have been to a live auction, but have been a bit leary of the on line ones.  Would love to know more about the process.  Am willing to share my info on rentals, tho I niche rent the bulk of my houses in the recovery/sober house community working with my son.  Having a niche has been very successful for us.  It helps us better target what we need in a rental house so we can be very specific when we are shopping.

@Elijah Batkoski

Congratulations!

How old is the house and which town? Did you get an inspection yet? Septic/well? If septic, definitely get a septic inspection, as well.

In terms of the cosmetics - do you have pics? In addition to the regular painting and flooring, are you also doing windows, kitchen cabinets, counters and baths?

Will you use a PM? If any case, it might be a good idea to do some landscaping first, then put up a Rent sign in the yard. Get some interest going while you do the cosmetics, which should not take too long.

Best of luck and keep us posted on your progress!

Originally posted by @Elijah Batkoski :

Hey everyone!

Thanks to BP and various books, etc., I have my (hopefully) my first investment property under contract!

It's just a 3/2 1450sqft single family home 30 minutes from Raleigh, NC. Purchase price of the home is ~75K and it needs ~15K worth of renovations/updates (it's mostly cosmetic, but the house is a nicely built brick home that has a new-ish roof and HVAC, so I want to do the cosmetic stuff right the first time!). Hoping to be in ~95K on the property in the end and rent it for about $1100/month. 

I found the property on Trulia, and the sale method was an auction site: Hubzu.com.. if anyone has any questions about those things I'd be glad to answer them!

I was wondering if anyone had any advice about the renovations..finding a renter, and mostly, going forward with refinancing/looking for more properties. Thanks so much!

 Congrats!  We've got a handful of properties in our portfolio (5 duplexes) out in Zebulon that have been performing fabulously for us.  We use a great property management firm that handles all of the day-to-day including finding tenants, ongoing management, repairs, etc.  Happy to point you in their direction if you're looking to "outsource" some of the activity.

Mind sharing your thoughts on the financials of the deal? Always interested in seeing what people are up to in the SFH space as it's just not an area we invest in (we only do MFH).

Hi @Tammy Vitale !

So the Hubzu process was pretty straight forward. I found the property on Trulia/Zillow and it pointed me to the Hubzu site to bid. I had to register, fairly painless, and when placing the bid I got to choose a few options. I had to bid with a Realtor ID/Firm, and I got to choose things like how many days I would need to close, and how many days I would need to find financing, etc. The bidding continues until the reserve is met (it can still continue afterwards, but that's what needs to be hit to move forward). My process was a little funky, the reserve was 68,000, and I had the winning bid at 72,000..however they didn't go with it and put it back up for auction the next week, in which I bid 72,000 again and won it again, then they sent over a Purchase and Sale agreement. The seller can choose to negotiate with the bidders even if reserve isn't met, and they can choose to decline an offer even if it is. 

Since then, I've filled out the PSA and they're supposed to send back a signed one today (I didn't change much). The PSA was definitely a "seller's contract" so I'm a bit worried about that. I'll let you know how it all pans out around the closing date! (June 26th)

One odd thing is that there was no inspection contingency, so be wary of properties that don't provide that, and also there was a 4.5% "buyer's premium" and $300 "technology fee".. just add those into your final bid price when doing your math.

Thanks for your comment.

@Betty T.


Thanks for the comment! And advice!

House was built in 1973, I haven't gotten an inspection yet but I have one lined up before closing. I'll post a picture of what they have on Trulia:
http://www.trulia.com/homes/North_Carolina/Zebulon...

The windows are fairly new, which is nice. Pretty much all painting/flooring, keeping the wood cabinets because they're in decent shape, just going to paint them and throw some new hardware on them. Baths need a deep clean, needs one new toilet and one vanity. Also needs a stove, fridge, and kitchen countertops (probably would be fine with what they have, but I want to do it right to attract responsible tenants). 

I will not be using a PM, the property is ~25 minutes from me, and ~10 minutes from my contractor/handyman and my parent's (my dad has a MHP in town). I figure maybe when I get more properties I'll try to find a PM, but as for now, I don't want to cut into my profits with only 1 property to worry about. 

Awesome advice on the rent sign while renovations are going on. I want to get someone in there as soon as possible!

@Matthew Saskin


Thanks for the comment! Didn't know I'd find fellow Zebulon investors here so easily. I would be interested in the PM info, I'm not looking to get one now, as I will only have one property and I don't want to cut into my profits with only one to worry about, but in the future I'm planning on acquiring one, so a referral would be great. 

As for the financials of the deal.. I wish that I would have gotten it a little cheaper, of course. However, this will be my first and I wanted to just go ahead and jump in instead of waiting around for that "perfect property". It's a brick property that looks fantastic on the outside with all new windows, a newer roof, and newer HVAC unit, so I went for it. Obviously being in at ~95K and getting ~$1100 in rent is not close to the "2% rule" we hear so much about, but it still gives me ~$200 in my pocket each month with factoring in heavy expenses/vacancy. It's my first, so I don't have much to compare it to, if you have any specific questions I'd be glad to answer them as best I can.

Where about are your duplexes in Zebulon? I'm interested in MFH as well, just haven't done much searching on them. Thanks!

@Elijah Batkoski

Congratulations on your first investment property!!

Renovation wise I would concentrate on the kitchen and the bathrooms tenants love nicer looking up to date kitchens newer knobs and faucets fresh pain and maybe even ceramic tile the floors if that is in your budget.

Craigslist will get you more than enough tenants or hire a good PM company and they will do all the work for you for a small fee.

Good luck keep us posted on the outcome!!

Derrick

@Derrick Craig


Thanks for the input, it's much appreciated!

Yeah, definitely fixing up the kitchen and bathrooms nicely. My dad owns a MHP..low income housing.. so he was like "oh we can keep this sink, oh these countertops will work", because he's used to people not wanting nicer things and just trashing them anyway, but I'm obviously planning on taking a different approach to my properties.  I was thinking of taking wood laminate throughout the home.. The kitchen is in an open floor plan with a fireplace/living area, so I wanted to make it constant flooring so they could throw a dining table in without having to worry about room separation lines. 

Elikjah - thanks for that run down on hubzu

@Elijah Batkoski

I love brick homes. Good luck with your inspection! Even though you will not use a PM this go around - are you, nonetheless, accounting for PM fee (8-10%) in your cash flow? At some point in time (when you acquire a good amount of properties), you might switch to using a PM to free up more time and to streamline your overall process.

@Matthew Saskin also -

I love that Zebulon has a good amount of land and still relatively spacious compared to Raleigh itself and further west & south. Although I'd like to live there myself on a couple of acres - what do you guys think of the future of the town? Will schools get better? Any new communities coming up and what is the absorption rate?

Happy you both are finding success out there...keep it up!

Originally posted by @Elijah Batkoski :

@Matthew Saskin

Thanks for the comment! Didn't know I'd find fellow Zebulon investors here so easily. I would be interested in the PM info, I'm not looking to get one now, as I will only have one property and I don't want to cut into my profits with only one to worry about, but in the future I'm planning on acquiring one, so a referral would be great. 

As for the financials of the deal.. I wish that I would have gotten it a little cheaper, of course. However, this will be my first and I wanted to just go ahead and jump in instead of waiting around for that "perfect property". It's a brick property that looks fantastic on the outside with all new windows, a newer roof, and newer HVAC unit, so I went for it. Obviously being in at ~95K and getting ~$1100 in rent is not close to the "2% rule" we hear so much about, but it still gives me ~$200 in my pocket each month with factoring in heavy expenses/vacancy. It's my first, so I don't have much to compare it to, if you have any specific questions I'd be glad to answer them as best I can.

Where about are your duplexes in Zebulon? I'm interested in MFH as well, just haven't done much searching on them. Thanks!

As long as costs are kept under control, that balance of rent to expense isn't terrible at first blush.  Raleigh in general, and Zebulon in particular, are very stable rental markets.  Our properties came almost fully occupied and many of the tenants have been in place for 5+ years, with a few in place for 10+ years.

For PM we use Golden Realty & Management and they've been fantastic to deal with.  Our set of duplexes are all on Lonesome Wind Way - it's a set of 5 duplexes around a cul de sac, so essentially the whole street is ours.  They were terribly mismanaged when we purchased, but in good overall shape and with stable tenants.  We're into it for $750k in initially (bought all 5 as a package) with a monthly rent roll of around $7k.  Everything was built in 1997, so we're getting close to thinking about roof repairs and have misc. HVAC and water heater repairs pop up, and are into each unit for $2-3k during turns to replace carpet, repaint, new appliances, etc. as the previous owner did absolutely no interior updates or care unless he absolutely had to.  That said, the last turn we did this work and replaced a 650/mo tenant with a 795/mo tenant.

Originally posted by :

@Matthew Saskin also -

I love that Zebulon has a good amount of land and still relatively spacious compared to Raleigh itself and further west & south. Although I'd like to live there myself on a couple of acres - what do you guys think of the future of the town? Will schools get better? Any new communities coming up and what is the absorption rate?

Happy you both are finding success out there...keep it up!

I'll be very frank - I would never live in Zebulon.  That's not a reflect on anything negative about the area, just not my style/location at all, so can't really speak to schools, new growth, etc.  From my perspective (and for my purposes), the area is safe and has a very stable rental (and owner...) population, and more importantly growth aside, the rental population tends to be very blue collar and not likely to (for example) leave and buy their own home.  I don't count on making any money via appreciation of our properties there - it's purely a long-term cash flow investment

Thanks everyone for the comments!

@Betty T. - I haven't been adding that in, but I probably should. I'm not sure when I'll hit the tipping point to get a PM company, but when I did I knew I'd just be taking a hit in profits to not have to worry about it.

@Derrick Craig - Again, thanks for the input! I'll definitely look into that flooring, I'm up for any ideas/input!

@Matthew Saskin - Thanks for the info on the PM company and the duplexes. I think Zebulon is a great market (I think Knightdale has a lot of potential right now as well), so we'll see how this goes! Hoping to get good long term tenants too (isn't that everyone's dream?!)

@Jay Neil

I'd have to agree! Thanks for stopping by the post!

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