My first rehab - rental property

24 Replies

More photos and more info at:

https://medium.com/@rafamvc/before-and-after-of-12...

Total investment : 85000

Purchase price: 24700
Wholesale fee: 12300
Roof, siding, cement pointing, soffits and gutters: 13050
Drywall attic and middle bedroom ceiling, tiles & trims, back door: 8800
Interior Painting: 2900
Plumbing: 1600
Electric: 3000
Appliances: 2100
Refinishing hardwood floors: 2700
Attic spray foam insulation: 2100
Insurance: 750
New boiler (oil to gas conversion): 5200
Random miscellaneous expenses: 5800

Rented for 1300/mo.
Taxes 1800/year.

Congrats!  It is beautiful.  I love the architectural features in the upstairs room.  

Great job.  Want to come and do a rental renovation for me?

Thanks guys. The house is in Chester, PA, but borders with Brookhaven, PA and Parkside, PA, in Delaware County, PA. I actually live in NJ, south Jersey. 

@Jerry W.  I'd love to! I love Wyoming, have been to Cheyenne during Frontier Days. We used to live in Denver, CO. I am not sure how great of deal I can be, but I am certainly willing to help anyone. This was my first deal, and I want to keep doing them so I learn more and more. 

I certainly did more than any other "regular" investor would do, but I ended up with a better product. 

The trick isn't to get renters, it is to make them not move!

Originally posted by @Rafael Floresta:

More photos and more info at:

https://medium.com/@rafamvc/before-and-after-of-12...

Total investment : 85000

Purchase price: 24700
Wholesale fee: 12300
Roof, siding, cement pointing, soffits and gutters: 13050
Drywall attic and middle bedroom ceiling, tiles & trims, back door: 8800
Interior Painting: 2900
Plumbing: 1600
Electric: 3000
Appliances: 2100
Refinishing hardwood floors: 2700
Attic spray foam insulation: 2100
Insurance: 750
New boiler (oil to gas conversion): 5200
Random miscellaneous expenses: 5800

Rented for 1300/mo.
Taxes 1800/year.

Looks Great Rafael! Have you ran comps on what the projected ARV is now ?

ARV is about 110 - 125k. Not a screaming deal but I can Refi all my cash out after 6 months. I paid all cash for it.

This post has been removed.

Also forgot to mention that I'd like to hear if the prices seemed high or off. All criticism are welcome. 

Hey Rafael,

Nice job. This looks great. Did you post the 'before' pictures anywhere?

It looks like you would net around $27k if you sold at $120k. This is right on target if your goal was profit of 20% of ARV. Was this the ARV you had planned for when you originally purchased? How long did this take to complete?

So at this point you're looking for a lender to loan you 70% of ARV on this?

Those are the before and after:

https://medium.com/@rafamvc/before-and-after-of-12...

It took 4 months. My main contractor had major issues with scheduling and delayed us by a whole month. I am also new and it was a learning experience for me.  It could have been done in 2 months.

I am looking for a lender, have talked to a couple banks that will do 80% - 85% ARV, but I don't believe until the funds hit the bank. Plan B is to season for 6 months and plan C is to season for a 1 year. Currently my best bet is TD bank, who does a HELOC at 5% based on my own credit for 8% of ARV. Going back and forth with paperwork with them. Their benefit is also that I don't have to pay the montlhy payment until I buy and use the money and I can lock it from a variable rate to a fixed rate for 100 bucks. Their closing costs are also very low compared with a convetional/portifolio mortgage. Only about 700 dollars total for the transaction.

@Rafael Floresta  - Just curious, if you sell this property who would be your potential buyers? Landlords, homeowners or other investors..

Landlords and homeowners pretty much. The market there isnt that bad. The current tenants expressed interest in doing rent to own or lease option. 

Great job Rafael,

Looks really nice. I checked out all the pics on the link.

Thumbs up!

That is way too nice to rent. You rehabbed this as a flip.

Most renters will not keep that nice.

@Rafael Floresta thanks for the responses. TD bank is also on my list of lenders. It's not too easy to come by a HELOC on an investment property. At what point did you begin marketing for rent? I suspect this must have rented extremely quickly. Are there other rehabbed properties similar to yours or is this above average for this area?

I started marketing way too early. I started marketing in June and only had two showings. It was a construction zone, we were on the studs and insulation in the attic, the bathroom was just rough plumbing. I showed them my color palletes, the tiles I bought and how I designed them, the appliances I had already ordered. I explained how I paid more than double to have closed cell spray foam insulation in the attic so the room becomes as comfortable as the rest of the house. 

 The tenants move in this Friday. That happened thanks to a contractor that was over a month late. My original goal was July 15th to be ready. The tenant has been great, since they had some flexibility with their lease. 

I certainly over improved for the area, but that was one of the selling points of the house for the tenants. They bought into my plan and saw the work get done. 

In a area where others fight for section 8 vouchers for 1200 for a 4 bedroom, I got 1300 with tenants with 750 credit score. 

It is easy to fill a rental, but I believe the money is made when the tenants stay for an extended amount of time. I don't think I have it all figure out, and I can't say they will stay, or even pay, their full lease, but I certainly did my part into setting them up for the outcome I want.

Maybe I am not getting the most amount of rent I could, but they are very happy with the deal they have and I got what I originally planned for. :)

HELOC with TD seems a limited road, since they are doing a lot of income/employment verification on myself. They are also requiring paperwork from my primary home, so they are trying to calculate my DTI ration. I should be fine for this deal, maybe another one or two, but I expect to ramp up more rentals before I can prove income in a full year of rentals on my W2.

The HELOC seems attractive for me because I can have a 0 balance until I actually use the money. If I want to use it like a mortgage eventually, I do have the option to get a fixed rate. It certainly isnt as low interest as a conventional, but I am also not paying closing costs. In a lower value deal like this, it almost evens out over 7 years, the average life of a 30y mortgage.

Originally posted by @Rafael Floresta:

ARV is about 110 - 125k. Not a screaming deal but I can Refi all my cash out after 6 months. I paid all cash for it.

If you paid all cash you can cash out to 70% of acquisition cost within 6 months of purchase which isnt much (conventional guidelines), however if you wait 12 full months from date title was recorded/acquisition you can cash out to 75% (single family residence/SFR) of market value. This should be much more satisfying since 75% of 125,000 value will be $93,750 loan amount and the payment for this with around 4.625% will be $ 482 per month + tax & Ins and you would still cashflow quite nicely while obtaining all your money and "then some," back.

@Rafael Floresta careful of the HELOC. The rates vary, so what cash flows now does not in 3-5 years when rates go up. If you make a mistake on the next one or something goes bad with your job or any number to downers happen and the rate climbs you are stuck.

Rates now are not bad. If you really plan to go the debt route it would be much better to lock in low rates.

I like the rehab! :)

Looks great. Did you do any of the work yourself or did you contract all the work out? What is the next step you will take? I am a 23 year-old prospective real estate investor. I'm very eager to get into the game but I'm hesitant to buy my first rehab/investment property. I have roughly $110,000 in cash to mess around with, what would you recommend my best course of action is. Like you @Rafael Floresta , I am from Jersey.

@Bill S. I will be careful. My plan is to hold the HELOC for maybe 6 months to 1 year only. No closing costs seems the perfect loan to have during seasoning period, and they lend on ARV, they said. I can even pay 100 bucks to lock a rate for some time, almost like a mortgage. I will make sure to make another post when I have more accurate information.

@Kyle Kovats  I contracted most of the work. I should have contracted 100% of the work. 

My main mistake was not to have a GC. Trying to sub it all out was a pain, contractors played the pushing blame game, and I was left with the short stick a couple times. 

I took plenty of risks, from buying from a foreclosure auction to not knowing how the refinance works after you buy a house cash. There is too many paths you can take, and if you are in Jersey, I'm down to meet and have lunch/coffee and give you my best advice. 

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