Portland Profits with BRRR
When baby #2 was conceived, I knew it was time to get out of our 2 bedroom duplex that we rented. I also knew that I didn't want to pay more than the current $850 rent, even for a bigger space. The solution? BRRR of course!
The Search: My criteria was very simple, East Portland / Gresham, 3 bedroom house with a basement that had a separate entry which I could turn into a rental, at a price I could afford. The only problem is that there aren't many of those kicking around. I only walked 3 houses in 2 months, but #3 was the one!
The Numbers: The house was a short sale, listed at $200,000. 1962, all original interior, bad shape, 1500 sq ft up, and 950 down. Basement entrance through the garage, which had a side door. 2 bath upstairs and 1 *cough* "bath" down. We offered $210,000 to get first in line and our offer was accepted. Took 90 days to close. Our agent was able to hook us up with a FHA Grant loan broker, in which the government just flat out gives you the 3.5% down payment. Total cost of home at closing $206,000.
Initial rehab budget $25,000 (Hah!)
Projected ARV $300-325,000
Before:
Wood wood everywhere! And all of it covered in peeling varnish.
We called this the "retro room" because of the 2 layers of awesome wall paper. We even got a bonus surprise when we pulled the carpet and discovered some awesome 60's, rock print, green vinyl underneath.
This is the living room, with the original wood paneling. How, charming...
Here is the dining nook. You can see a little bit of hardwood peaking out from the carpet. Finally something worth keeping!
Oh how I loved that galley kitchen! The fridge was DIRECTLY across from the stove. Now where's my sledgehammer?
Our Tiny master bathroom. I used 2 tubes of caulking to cover over the massive rot lurking under the peeling flooring to pass the appraisal.
The Rehab:
During the first stages of the rehab we were living at the old place, and I was working on the new place every night after work 5-10pm, then 12+ hours on Sunday. Closed December 1, and had no heat. One day it snowed a bit, and the snow I tracked in never melted all day. Yuck.
Basement - Everything, I mean Everything had to go. The only thing I kept was the furnace, after replacing all the internals.
Remember that dining nook, kitchen, master bath, and main bath? Yep, all those went away. We opened up the entire side of the house to deal with the rot behind the shower. We put some new windows in since we already had the siding off.
Goodbye iron plumbing. Hello mound of concrete to haul up the stairs. I left a the old power intact until the last possible moment.
Painting over all that old woodwork was a joyful day!
Bedrooms got wall texture, paint and all new baseboard. I even got a little help with the masking from Sage.
Putting the last coat of finish on the hallway before bed. All the bedrooms had oak as well, but we decided to put carpet down.
Cabinets, finally something I've done before! The garage has definitely never seen a car since I've owned it, and it never will! Cedar says "Daddy's been working on this stupid house MY ENTIRE LIFE!"
I turned half of the old kitchen into the upstairs laundry room, and turned the dining nook into more kitchen, minus the original wall.
There are many other fun things not shown:
- Complete rewiring of all electrical, including new meter base and panel.
- Lots of attic and crawlspace work.
- Insulating walls, attic, basement
- And so many other random tasks that eat up hours and days, even though it seems like nothing at all is getting done.
Basement After:
We kept the basement very open for the main room. This view is looking from the kitchen.
View of basement kitchen. I got away with putting a stove plug, even though I can't "legally" have a stove down there. I would NEVER put a brand new stainless steel stove in my basement apartment, even though I could jump through some permits hoops and magically make it legal. No wonder housing is so darn expensive here.
Egress window in basement bedroom makes it deliciously legal.
Furnace is just to the left of the door. Our old W/D were perfect for the rental unit. Bathroom is through the door on right.
We just BARELY managed to fit the shower unit down the stairs, it took some major shoves to flex through.
The other basement room. I would have liked to turn this into a legal bedroom, but there was no way to put in an egress window. :(
Main Floor After: Ok, on to the main event!
Living room: We put in a fireplace insert with a blower, it really heats the place up fast. Too fast sometimes. (It's never too hot according to my wife). I made the treasure chest.
Here's the new dining area. The old nook wall became an island. I made the table.
Yes, that's a 36" Wolf commercial range. $500 off craigslist. I cut and installed the granite as well.
Main bath got a skylight with its makeover.
Master bath grew 16 inches, and got a 48" shower installed. Turns out I could have gone with a 60", but I only had a few hours when I could get it through the window opening so I just grabbed the cheapest one I could find.
The Final Cost:
Purchase $206,000
Holding $7000 (Cost over and above our previous rent through August 1 when I rented the basement, includes 3 months when it was vacant)
Remodeling $45,000 (only about 10k was contracted work, the rest is pure materials)
Hours of my life - Maybe 2000?
All in total: $258,000
Projected value $335,000+ (My appraisal report comes back in 10 days, I'll update when I get it)
Refinance with 60k cash out for payment of $1750 / month
Monthly rent from basement apartment $1150
Monthly cost ~850 a month after utilities with $0 cash left invested.
$65,000+ equity in property.
What next: I can't wait for my refinance loan to close so I can go buy the next property! Anyone in the Gresham / Portland area want to do a deal together?