I just paid for my newest rental. It's in a quickly-improving neighborhood that was a D neighborhood two years ago, is probably solid C now with downtown and near-downtown gentrification moving in from two directions and what I'll generously call "opportunity" properties still on the other direction. In a year or two, this home will probably be in a solid C+ or B- area.
It's a tidy little 3/1 brick, built in the 60s, that doesn't need much work. Needs new gutters, facia board work, plumbing check, carpet, appliances, and minor kitchen work. Oh, and I'll probably have a huge tree taken down in front of the house -- I don't think the insurance company will insure the house with that menace on the property. Already has vinyl windows. I have my guys lined up to begin work next week. Barring bad news with plumbing and electrical, I'm guessing on a $6K budget and about three weeks.
I got a steal of a deal as the home cost only $9K. I'll be all in at $15K. The rent should be $750-$825. If gentrification engulfs this neighborhood as I expect it will, 2017 rents may be in the $1000-$1100 range.
I could probably sell for $40K today, and $55K after my minor updates. Gentrification has already taken over the area 3-8 blocks away. There, this home, once updated as I plan, would probably go for $75K today. I plan on holding it long term and renting it for decades to come.
Coming into 2015, I hoped to buy one property by spring, and hoped against hope that I could get another around Thanksgiving. Seeing as this one came so cheaply, I've altered my plan. I think I'll get a second in 2-3 months, and try for a third by November. By the end of the year, I could own four properties outright and only be carrying a small loan for the fifth. If I can achieve that, my fifth SFH rental overall, that should set up a very exciting 2016.
Sorry for the long post, but I'm an excited little REI puppy.
I hope to post pictures in the next few days.
You have every reason to be excited! Those are my favorite type of neighborhoods. The ones you see huge promise but everyone else hasn't or isn't there yet!
That's how we did so amazing Summerville! My only piece of advice is buy buy buy. I wish we had been able to buy more at the time !
congratulations @Randy E. , I am aiming to gain my 2nd property this year and I will be fighting hard for that. So seeing this is encouragement!
That is awesome man!
Thanks @Elizabeth Colegrove . Those neighborhoods are favorites of mine too. I also like solid blue collar C+/B- neighborhoods. With proper screening, those are full of long-term renters who pay their bills and take care of the property.
Thanks @Ryan Potter . Keep your eye on the prize and keep planning and saving. Every time someone says "you're lucky to have properties," I silently remind myself that it's 10% luck, but 90% planning/saving/preparation.
@Randy E. Congratulations! Keep up the good work and good luck on project.
Thanks @Ryan D.. I think so, too. :-)
Thanks @Tom Keith. I have my fingers crossed that no big problem will come up during repairs. Because I saved on the front end, I could easily afford something like that, but I'd rather put it into buying the next property.
fantastic! Great deal. I like the NC market.
Thanks @Alan C.. I like the NC market too. Lots of pigs down here that I have my eye on. Unfortunately, these days, so do a lot of other investors. It's getting harder and harder to get these deals.
Wait, does a $15K house even count as a pig? Maybe it's just a stick in the mud.
15k houses are great when you can find em. !!
Congrats @Randy E. .keep up the good work
Nice. Which part of NC?
Thanks @Bhekizwe M. I'm continuing to grind as we speak. Hopefully, another nice deal will be unveiled soon.
@Les Jean-Pierre , I am in Durham.
Congrats @Randy E! That is awesome.
Congrats on a sweet deal! I know the exact area you are talking about and it's heating up fast. With the major construction projects slated for the next few years in downtown and the gentrification you mentioned, your property will definitely be going up in value.
@Michael Jobe thanks. I'm already looking for more properties in that area. There are always a few available, but the fit hasn't been quite right yet. Now that I have a house in the area and I'm around there more often, I'm sure I'll get wind of a word-of-mouth deal.
Once the home is ready to rent, I plan on having a big cookout in the front yard for the neighborhood. I'll probably spend less than $100 on hot dogs, hamburgers, chips, soda, and plates/cups, but it will build a lot of goodwill in the neighborhood. I'll use that cookout to get the word out that I'm looking for properties that people might want to unload for quick cash deals. Free food will get people in an agreeable and talkative mood. :-) "You know, my man Fred inherited this house from his uncle Gerald and he's three years behind on his taxes and wants to get rid of it, but he hasn't gone about putting it up for sale yet. It's right around the corner. You interested? ..."
Dude, those numbers are great as long as you don't need a bullet proof vest. Sometimes the extra headaches with low priced properties can pay off, if you can get all your cash back in 3-4-5 years.
After being delayed a few times on small projects, I'm nearly finished with my planned updates on this property. The delays were mostly all my fault from being too busy with life stuff, but the slow progress may have turned out to be somewhat fortunate.
As I mentioned earlier, the neighborhood is a C to C- area. It is very near gentrifying areas, and I conservatively estimated the process might take another two years or a little longer. Currently, the immediate area is very low-income with very few and very scattered middle-income very-early adopters. Looks like I may have been too conservative.
Yesterday, out of the blue, I received a call from a newly-relocated professional who may want to rent the house with her fiance. They want to move in in mid-June and were happy with the price range I gave for the rent. I say "out of the blue" because I haven't posted the property for rent yet, not online and not even a sign in the yard. She was visiting a friend in the immediate area, noticed the work being done on the house, and asked around until she found someone who knew my number. Sounds like they REALLY want to move to the neighborhood, warts and all.
Cutting to the chase, here's my dilemma. I was finishing the place nicely, but keeping in mind the current client base, not too nicely. I figured I could update the property again in a couple or three years when the area showed significant gentrification. Now I'm wondering if I should just do better upgrades to a couple of things now and aim for a better clientele (and higher rent) than I thought I might get for my first tenant.
For instance, the bathroom had some old plastic tile on the walls. They were in decent shape, but definitely show their age. I was going with vinyl on the floors, but it isn't installed yet. I already have a nice vanity, sink, and faucette to be installed. Now I'm thinking I should replace the tile on the walls now with nice tile, and put tile on the floor? There are a couple of other upgrades I'm considering (nicer appliances for one) that would add a few thousand dollars to my costs, but could increase the rent by nearly $200 immediately ... if I can get professionally employed tenants. But, if I don't get those tenants, all that extra work and money will yield no immediate return.
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