While there's been much to learn through the podcasts, one thing consistently jumps out at me. Just do something! Execution is key, failing is learning and experience is gained through failure. So here we are upon our first opportunity and quite frankly about 3 to 5 years sooner than anticipated.
The magnitude of challenge extends across the board. From the lack of hands on DIY experience, physical tools, rental regulations and requirements, repair/renovation estimation, and just about everything else one can think of.
However, I came upon an opportunity where a friend without any knowledge of my desire to buy and hold, explained current pain with a house that he can't seem to sell. He has since moved from this home but carries a burdensome home equity note. The house has been listed for almost a year and is it much need of repair.
- Asking Price: $43,000
- Zillow Zestimate: $48,600 (down -$7,600 Last 30 days)
- Year Built: 1948
- Lot: 1.5 acres
- 875 sqft
- 2 Bedroom, 1 Bath
- Detached Garage
- Central Heat & Air: Installed 6 years ago
- Original Electrical and Plumping (With exception of added outlets and breakers for central heat/air)
Through candid casual conversation and before my expressing interest, I learn that the home equity loan owed is $29k. While unconfirmed it is my belief that he may be motivated to part with the home for not much above the amount owed.
I'm really not sure what to include here or how to best elevate the quality of this opportunity. I am concern with the house being 66 years old in respect to our obligation for safe and effective electrical/plumping for tenants. What legal obligations exist for rentals regarding updated infrastructure requirements.
At first blush I ponder the possibility of making this purchase at sub 35k. I've even considering the research of options to somehow assume this note and thus take ownership of the house. At this time I'm not yet sure how to calculate repair cost or ARV. The area supports $650 to $750 rents with similar in size/spec homes. My best stab at online mortgage calculators show mortgage/tax/insurance to be an estimated $300 or so per month.
On the surface without experience this seems like a great deal. Though I know there's more to the picture and I'm not entirely sure how to determine it all with accuracy. I suspect putting in 10k to 15k in repairs but that is an arbitrary guess at this point.
First post, and ramble-filled... I invite the wisdom and insight of others should you feel so inclined!
Do not trust Zillo for price estimate. Get someone who knows the market, maybe a realtor or local investor who knows the market.
I would also bring in a local contractor to get a price on rehab.
Then compare the purchase price + rehab vs cost of buying a rent ready home in the neighborhood.
You can check rentometer.com for a estimated rent value.
If you don't mind living there then you could probably handle most of the repairs yourself, YouTube is a great resource. You will have to buy tools but will still save money vs. hiring it out and you will then have the tools.
Also consider if you could live there, while you renovate, that would make financing easier and you will find yourself much more motivated to get the repairs done.
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