Recently my husband and I jumped head first in to being REI's and landlords. We've been looking for a couple of years for something to invest in, but he's not a fan of properties which need significant work and we haven't been able to make the numbers work for any properties that even remotely interested us.
In January, a property showed up on Auction.com that seemed like it had potential. We drove by the property to see if it actually might be occupied but could not verify from the curb. After some research, we decided to take a chance and bid. A few things made us extremely wary. First, we could not view the property prior to closing except as a drive by. Second, we would receive a QCD. Third, we had no idea what the situation of the occupant was, who they were, or if we could get them out without a fight. Naïveté occasionally leads to risky choices - so we bid, and lost. Oddly, my husband received a call that evening (which he missed) from Auction.com. Turns out, they may have moved forward with our last offer if he had answered the phone.
A few days later the property showed back up on the website so we bid again, this time allowing for a bid price $1,200 higher than our last max but still below what we lost it for last time. This time we came out as the top bidder. Hooray! Except now we were going to be spending a significant portion of our funds on an occupied property we had never seen and which we would only receive a QCD for. Anxiety sets in.
Six days after closing we posted a 48 hour notice to enter and crossed our fingers and said a prayer. Would the occupant be aggressive? I went home, sat down at the computer, and did the research we should have done while (before) bidding on the property. We contacted the utilities to see what we could find out - all were on and paid up-to-date and one was kind enough to confirm the last name was the same as the previous Owner. We contacted the Real Estate Agent that had listed the property in August of 2014 and discussed the previous Owner and Occupant's personalities. And we found the contact number for the previous owner in case we did not receive a response to our notice to enter.
Turns out, the current occupant is the brother of the previous owner. He's not on lease but we have agreed verbally to keep him in the house (paying what he currently pays his brother) for a couple of months while we line everything up. He has agreed to allow us full access to the house to begin work. I still think we need to get this all in writing.
The condition of the house is, let's say "fair." The original wood floors have been refinished in every room except one (which we will carpet due to asbestos concerns, meaning we thing the flooring in that room might be asbestos based and we don't want to play with it). The furnace was oil, converted to gas at some point, and basically does not work. All of the new windows are missing interior casings and the entire interior could use a new coat of paint. We're going to attempt to salvage all of the existing cabinetry and add a bit more storage in the kitchen. The paint on the exterior needs to be finished and the gutters could use replacing.
We have been renovating our own house (for years) so we plan on completing a majority of the work ourselves.
This process is a bit nerve racking and since it's really our first, I'm sure we'll make a ton of mistakes, hopefully none that make this a money loser for us.
I'll post photos in the next week or two.
Any advice or ideas are welcome!
That appears to have turned out well.
If you join either the RHA or the WLA then you have access to various forms if you decide to do a rental agreement. And you get the info you need on required disclosures (lead, mold, CO2), etc. It is possible you may be required to provide these even on a legacy tenant. CO2 alarms mandated by Washington state law, so put those in pronto. May not be a bad idea to do a condition checklist with him just to verify present condition, even though it doesn't sound like there will be a security deposit involved.
Those are just a few kneejerk thoughts.
Matt Gouras thanks, those are great tips! We're so new I had no idea those organizations existed.
@Caroline Hedin Thanks for sharing this experience! I'll be eagerly awaiting your updates!
Oh, and if you don't mind sharing.......
Where is the home? Tacoma? What neighborhood?
What was your winning bid?
How much were your closing costs, etc?
What's the ARV?
What do similar SFR's rent for in that neighborhood?
Are you going to manage it yourselves or are you hiring a property management co?
I'm going to bypass some of your questions out of respect for my husband so please don't take that personally.
The home is located in Parkland between PLU and the back gate to McChord AFB. It seems that 3/1's rent for $950 - $1,100 in this neighborhood. We get the students attending a private college, but the neighborhood is solidly blue collar/middle class housing. We'll be managing the property ourselves (following all of the advice supplied on this website and from friends who have managed their own property for a few years).
@Caroline Hedin , haha no offence taken! I know some people are very uncomfortable talking money publicly, so I'm OK with the shyness. With RE it is all public record anyhow, but I still understand. I like to hear numbers because we're all doing business and analyzing each other's deals. I have been looking at Tacoma a little and am curious about what's going on down there from the investor's eyes.
Thanks for your reply, even with the omitted answers!
Thank you for your post. Let me take off my broker hat and put on my investor hat. My husband and I have watched the auctions for some time now and have noticed that some of the homes are occupied. We have been leery of pulling the trigger on some of these homes. I am looking forward to watching this feed to see if other investors have pulled the trigger and read about their outcome as well.
@Caroline Hedin Washington Landlord Assoc has a quarterly meeting Thursday, March 5 at Sizzler on S. Tacoma Wy at 6:15. You don't need to be a member and the only cost is your dinner. Be glad to connect if you can make it.
@Curtis Bidwell My wife and I would like to attend your landlord assoc meeting if you still have room.
Finally a few minutes to update on the status of this project.
We've been slowly working on the renovation of the exterior of this home and the tenant is slated to be moving out in ten days (although he has not begun packing yet). We've chosen the carpet and the vinyl and have created our list of items left to accomplish. I've pretty much settled on a light gray for all of the walls and white trim and ceiling. We're replacing all of the interior doors and have settled on solid wood with the hope their durability will mean less replacements. Fingers crossed/prayers said, we'll come in under the $10,000 budget we've given ourselves. We're hoping to salvage the appliances and perhaps replace them after the next tenant but that all depends on how clean we can get them.
I've yet to come up with a simple landscape plan (not my strength) so if anyone has any great ideas, we're open to hearing them.
The house was built as a 2/1 and at some point (I believe in the 80's), the garage was converted to another bedroom/living room with a fireplace. The flow is a bit awkward but we won't be changing it. At some point in the distant future, we may add on to the structure and make it a duplex or add a second bathroom and sell it.
Here are some photo's of the existing conditions. None of the work we've done is really visible so there aren't any progress photos to show.
We're hoping to save the kitchen cabinets. I'll be getting quotes for new doors as I think the existing ones are just too beat up to look "new" for a new tenant.
@Caroline Hedin Drove by your new rental today. Looks like your making progress. When it was on Auction. com I looked it over but decided not to bid. Hope all goes well for you. Did you get the old tenant out?
@Tim Holmes , we finished replacing the siding on one end of the house. Still so much left to do. He was packing and moving stuff this past weekend. Looks like he'll be out by the end of the month and we'll get moving full steam ahead next week! Glad you didn't bid on this house...then we might not have gotten it 😉.
@Tim Holmes , out of curiosity, what made you decide not to bid? Do you have any properties in the area? One of the duplexes a block down the street was recently for sale but they wanted too much for it based on how much work was still needed. We figured the ROI would have only been around 4%. It's tough to make money in Tacoma we're finding.
Awesome work Caroline! I look forward to seeing more progress work in the future on the property!
@Caroline Hedin When I looked at the house the first window I looked in was the front right bedroom. Looked like the house was going to need a major trash out. I went around the house counter clockwise looking in each window. When I got to the kitchen slider I could tell someone was living there. Didn't want to mess with that. Also not sure I wanted to rent to college kids. Since then I have met three people who have had good results renting to students. I also looked at the small duplex just west of you and thought it would be an easy finish. Looks like an investor ran out of money. I own two houses a couple miles south of you on military rd.
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@Tim Holmes , yes, that room was (is) full of junk. We got pretty lucky/blessed that the rest of the house isn't like that. We did have to put a new furnace in (it hadn't had a working furnace in two plus years) but beyond the one end of the house, it's mainly cosmetic. We also were blessed that the occupant has been pretty stand-up. If he was cleaner, we would probably reno around him and ask him to stay.
We're likely talking about the same duplex. Our realtor looked in to it for us and you are correct, the investor ran out of money - sort of. I understand they were wanting to sell it as-is but if they couldn't get what they were asking, they would find a way to finish it and sell it fully renovated.
We think we can also pull military families with this location. How have renters been for you in the area? Have you been having issues keeping the houses occupied?
@Eric Deshaun , thanks! We still have a lot to do :-).
Reading this thread has been pretty instructional for me, as my wife @Jan Wieder and myself are looking at buying rental property in Tacoma. The SFR market is tough now where we are, and we've also considered taking a first look at auctions. Thanks again @Caroline Hedin and all.
@Caroline Hedin We have not had an problems with tenants, or keeping rental occupied. Just make sure you set up your criteria to show to prospective tenants and than follow though with the screening.
So we've finished running the numbers to give us a harder budget for renovations. Because we had to replace the furnace, it's led to requiring some "hard" choices. We are trying to keep the renovation work to $10,000 or less. Since it's a rental and likely our tenants will be students, we've decided to refinish the old kitchen cabinet doors and replace the hardware rather than purchase and install new cabinet doors. While the cost wasn't too high at $1,200, it is a significant chunk of the remainder of the budget. Particularly since we have decided to replace the dishwasher, range, range hood, and refrigerator. (If anyone has good recommendations for appliances, we would love to hear them!)
Does anyone have any thoughts on this?
We would like to do some landscaping at the front yard to give the home a bit of "curb appeal." We probably won't be doing much of anything with the back yard. Does landscaping matter to tenants? Any recommendations on yard service in the area? I don't trust the tenants to mow the lawn and weed and really don't want to spend my spare time over there doing this myself.
Well, it's May 1st. I was at the house this morning with the locksmith and window guy. He still has items in the house but told my husband last weekend that anything left we could do with as we please - and there is a lot left :-/. I changed all of the locks and sent the now former tenant a text message asking if he really was not in need of any of the items there, that we had changed the locks, and that if he needed anything, let us know and we would let him in. I feel like we've actually been pretty blessed with this process. It could have been so much worse than it has.
On another note. We should have had the new windows installed before we re-sided the end of the house. Lesson learned for the future. As the window guy said - "roof first, windows second, siding third." I use the excuse of my experience being in larger commercial projects, for not having thought about that. On ANOTHER note, also do not miter the corners of the trim around windows. Think about how that directs water in (yup, IN not on) to your wall. Another "touché" moment. "Luckily" we'll get the opportunity to reinstall that trim since the window guy is going to have to reframe the openings since, well, the former owner who is supposedly a master craftsman, basically chipped away so much of the header, cripple studs, and sill, that there is truly not much left of them.
Interior clean up and yard work begins tomorrow!
@Caroline Hedin , thanks for sharing your story with us. It's an interesting read. Would you mind sharing your progresses?
@Yinan Q. I keep meaning to take photos and post an update. We're starting to paint the exterior today so I'll take some new ones and post an update this weekend! Thank you for asking :).
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