We bought our first rental!
My partner and I began discussing Real Estate early this summer. Originally, I became interested in RE after hearing about friends who were successful. My first "Youtube" search led me here, to Bigger Pockets. After finding this site, I became addicted. I've been "lurking" and reading your posts, and listening to the podcasts daily.
Both my partner and I took out HELOCs on our current homes (mine is an owner occupied duplex that I rent to my brother... another story for another time). We have an LLC in place, our EIN set up, a bank account, and an operating agreement. While working on these items, we have been searching for homes to purchase. We tried "driving for dollars" a couple times and actually had decent leads come out of it, but did not end up making a purchase as the numbers did not fit. We have been monitoring auction websites and this is where our first deal came from.
Here is the break-down:
- 3 bed, 2 bath vacant home
- Located in a fairly remote location, however there is significant employment within 20 miles
- Manufactured home on a foundation
- Repairs needed are mainly cosmetic... some flooring and paint and a little work in the bathroom. Landscaping, and there is a massive barb-wire fence around it we need to remove.
- We found comps in the area for around $60,000-$80,000 (we are newbs so it was difficult to pinpoint exactly where we should be... we played it safe)
- Our plan is to rehab and rent
- We believe we can rent this for at least $900 per month. There is nothing available to rent within 20-30 miles of the home... We are going to pre-market this at $1100 per month and see what happens
- Our max price we were willing to go at auction was $34,000 (based on 60,000 * .7, - 8K estimated repairs), ($900 rent*50 = $45,000 - $8k = $37,000)... We landed on $34,000 because there are some unknowns
- We won the house for just over $21,000... We consider this an immediate $13,000 profit!
We are hoping to close this week (as soon as possible) and get into the house to put together a good scope of work and get this house cash-flowing as soon as possible. Once the house is in good condition, we will take out a HELOC on it and do it again!
BONUS: While bidding, we noticed that the house comes with two identical lots next to it... We are considering removing trees, installing well and septic, and placing manufactured or mobiles homes on these for rent as well. Thoughts?
Any feedback or words of caution are greatly appreciated. We are excited to finally have our "feet wet"
Bernie Tobin
Great Lakes Real Estate and Rentals, LLC