How I Bought a Home in the Middle of Town for $10,000- Update!
Find out how I turned this
into this
I wrote a blog post almost two years ago about how I bought a house in the middle of town for $10,000. You can read about how I found the property and closed the deal Here. This post is a final update on everything post closing including construction costs.
First thing we did was draw up plans and have them appraised by the bank. Our goal was to build the most efficient rental property possible so we went with a 3/2 and 1,300 sqft. The appraisal for the plans came back at $180,000! This is important because our projected budget was $130,000 so we would have a whopping $50,000 in equity after building! The bank offered a one time appraisal in the beginning so we weren't in jeopardy of a low re-appraisal after completion.
Construction began and for all intents and purposes things went smoothly. We had a big delay installing culverts, which stopped all other work because it rained everyday for about 40 days straight and the ground was extremely muddy. Once culverts went in it was full steam ahead. The entire project took right at 5 months. We ended up going over budget by $10,000 which brought the total to $140,000. Our max before PMI kicked in was $144,000.
I preferred lumping in the extra costs on the first house since my mortgage is a personal loan and the rate was only 3.625%. We are currently living in this home while we renovate our future home.
We started on the next two right after we moved in. Those two went very smooth since the land was already cleared and ready to build on. The bank appraised the plans for $175,000 and with our budget of $126,000 we still had a projected $50,000 equity in each house. We actually came in under budget. The total construction costs came out to $119,000 per house including the $10,000 contractor fee. Only labor and materials came out to $109,000 or $84/ft.
The 2nd house is currently occupied at $1,200/m while the 3rd just came up for rent at $1,250/m.
The numbers break down like this:
Purchase price for land and house: $10,000
Demo of house, tree cutting, land prep and culverts: $25,000
Total appraisal value of all three houses: $530,000
Total cost of construction/mortgages: $392,000
The most beautiful part is I was able to buy land, build three brand new rentals and use barely any of my own money! The bank was with me every step of the way!
Here are a few pics of the finished project!