I love reading the Deal Diaries on BP so I thought I would write my own. Hopefully, it will help others learn from my experience and avoid the mistakes I make (I'm sure there will be plenty!)
This will be my third rental in a suburb east of Cleveland. It's a small 3 bed/ 1.5 bath, 1075 sq ft home. It's a HUD home that was listed for $50k.
May 10th - bid $42,500, I took a risk and bid on this home site unseen. I have followed the market pretty closely for the past few years and felt that it would make a good rental. Two days later my bid was accepted. If you've never bought a HUD home you might be surprised at the offer process. The initial offer is submitted electronically and if accepted a formal paper contract must be signed by both the broker and buyer. Because I am in California and my agent is in Ohio the documents were overnighted to me on May 13th and then I had to immediately overnight them back. They must be signed in blue ink and there can be no crossouts so sign carefully!
The inspection process on this home ended up being a real pain. When my inspector got there the house hadn’t been de-winterized and all of the electrical fuses were in the off position so none of the water or electric could be inspected. This is a downside of out of state investing, even though I’ve used this inspector several times because I wasn’t physically there to flip the switches they couldn’t be checked. A few days later my dad turned on the electric and had the water company come back out to turn on the water so the rest of the inspection could be completed. No luck this time either! When the water was turned on water began pouring through the kitchen was so it was immediately shut off and again no inspection. The house is a slab home so there’s a decent chance the broken pipe could be in the slab which could really add up.
Knowing that this is a HUD, as-is, home I figured they wouldn't credit for repairs to the plumbing but I did have my agent ask. They came back and said no, so basically it's either take my chances on the plumbing or walk away…
I decided to take my chances! I guess we will see in a few weeks if I end up regretting this. For now, I will keep my fingers crossed.
June 9th-last day of Lowes sale for free delivery & an extra 10% off appliances. I paired this sale with a coupon for 10% off and used my lowes card to get an extra 5% off. In the past I've waited to check out used appliance shops and Sears outlet but never am able to get the appliances in time. This time I'm ordering them new but getting a great deal and can choose a delivery day that I'm in town versus paying someone to wait at the house for the appliances. If for some reason the house doesn’t close I will cancel the order.
June 15th –Received my closing paperwork via Fedex. There was actually much less to sign than there was on the original offer paperwork. I returned via FedEx along with a cashiers check for the remaining balance.
thanks for the post Carrie. I'll be following with interest. I'm also in California and just started investing in rental property in Cleveland.
It'll be useful to see if going with fixing the plumbing pays off.
@Leah M. thanks!
@Travis H. you're right, it definitely will be interesting!
If the pipes are broken in the slab you can always go up and over into the attic.
Good luck with the deal.
Thanks @James Wise I will keep that in mind next week!
Yesterday, I received a call from my agent that the house had closed. She also told me that the listing agent took their lockbox off and left the key under the trash can!!!! I feel like this is a bit of an unprofessional practice but luckily my dad lives close to the home so he picked it up for me. This week I have been scheduling contractors for next week and trying to get estimates on some exterior repairs that need to be done. I'm hoping to have the house up and ready in a week. If that doesn't work out I will have to turn the additional repairs over to my management company or finish when I return in July.
I also received a worried call from my insurance agent today that underwriting would deny the house in it's current condition! She hoped I would be fixing the soffits and fascias soon or the pictures wouldn't go over well. Her boss asked her if the house had even been winterized (with worry about the plumbing!) It had been winterized but this brought me back to my initial worry about the plumbing.
On a side note, I received my inspection on another house I had pending and it came back pretty bad. So hopefully, if I have time I'll get to look at a few homes next week.
@Zach Adams this particular property I paid all cash by way of a Heloc on another property. I will then refinance into a mortgage. The last rental I did was an reo and I used traditional financing.
This is a fantastic forum post! Most of the time, people only post the 'shiny' flawless occasions. Though it may seem rough right now, this how may have some real opportunity! I plan on paying attention to this as your adventure continues! Good Luck!
Funny I am in a very similar situation in the next town over. In contract on a HUD that had not been winterized. I was supposed to close this Friday but there were several delays with the appraisal (lockbox had been stolen when appraiser showed up, next time they came they were given the wrong code, etc). Appraisal finally happened Friday and I should hear back today. Bank UW will then take 2-3 days. I had to file for an extension ($375 ouch!) as I still need to have my sewer line inspected prior to close. The plumbing will need to be completely redone and to top it off this is a hydronic baseboard system so on top of the regular lines I will need the baseboard piping re-done as well. I had recommended HJacks to you a few weeks ago. I believe I am going to have them complete the job with pex/ PAP. Also the electric panel needs completely replaced. I already have estimates for the repairs, should be under 10k for everything to make rent ready.
Purchase price: $43,000
This place demands a little more rent than normal around here as it is in a beach community with private beach and island access plus a marina (but not in flood zone).
Good luck with everything on your house! Hopefully I can close next week, get everything fixed during July, and be rent ready by August 1.
Day 1 Complete! I took the redeye Monday night and jumped right in yesterday. It was great to finally see the place in person. Pictures never tell the full story, like the fact that the white kitchen cabinets really are in pretty good shape but need a good scrub down. Or that several of the rooms need lighting fixture (none of the photos in the listing or from my agent captured that. )
@Travis H. taking a risk on the plumbing paid off! As it turns out a piece on the dishwasher was broke flooding the kitchen every time the main water line was turned on. It should cost me $100 max to fix.
Yesterday, I spent $166 on paint. And almost $300 at lowes on blinds, light fixtures, bulbs, cleaning supplies, mulch & some plants/flowers for landscaping and a few other odds and ends.
My plan for day 1 was to finish my scope of work (since I hadn't seen the house,) meet several previously contractors, buy remaining supplies (several I already had ordered through lowes & Amazon.) Also, thanks to my Dad (he's a painting contractor) the painting began on Monday.
@Jason Keefer thanks, I really appreciate that, I want to give an honest look at the process for those who aren't as experienced.
Sweet! Ive heard that sort of thing can be costly. It's good to know it was something simple. Still, $100 for a dishwasher part? Was that something you had to special order from the manufacturer?
I really like this thread @Carrie Giordano . I'll be following with interest as it progresses. I'm really happy to hear about your plumbing as well. That could have been costly. $100 is reason to celebrate!
Thank you @Meghan Reed . Trust me I was celebrating.
@Travis H. the part is special order. My appliance repair guy came today and the part is $57, with labor it should be about $100. I considered putting in a new dishwasher but with installation it would be at least $300, so I'm going with the current one for now.
@Jeff Brower it sounds very similar! Hopefully you'll have similar luck like I had with the water. At 10k in you're still doing better than the 2% rule so that's great! Keep me posted, I would love to hear how it works out for you.
congrats and good luck with new purchase
@Jenkins Ramon Thank you !
Day 2 - Complete! It's suppose to rain for most of the week, except for today, so knew I needed to take advantage and knock out the landscaping. I also wanted to follow J Scott's lead and start with the outside of the house to create interest. I brought along my nephew and for $25 he helped out until lunch. Luckily, it's a small yard so it only took a little over half a day. That left me enough time to scrub down the kitchen cabinets. If you're ever considering putting white cabinets in a rental I would think twice! After a couple of hours of elbow grease and the help of a magic eraser (your best friend for white cabinets) they really look like new!
Today, I also had to meet with contractors regarding the gutters, soffits and fascia boards. I knew going in that they were in bad shape and had a lot of rotted wood and beat up gutters. Someone previously had attached 2x4's behind the gutters which extended the gutters a couple of inches beyond the end of the shingles causing the water damage. Here's a few pics of the damage.
Honestly, I had no idea what this would cost. I hoped some of it could be salvaged before seeing it in person and estimated it to be around $1400, but knew it could potentially be higher. I received a few quotes and found a good rate for gutters to be $3 per linear ft. I decided to go with a carpenter highly recommended by my plumber (whose referrals have always been great) who was accommodating enough to shift his schedule so he could start tomorrow! To replace the gutters as well as all new vinyl soffits & fascia boards and I will be paying $2300. I could have gone with wood and it would be a bit cheaper but I like the idea that the vinyl will not need to be painted and will have minimal maintenance.
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