First investment property! Took action!!

First investment property! Took action!!

Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes

Hello BP!!! 

Well after many, many months of reading and educating myself from the wealth of knowledge here my wife and I have purchased our first investment property! 

Ruby Door Properties, a brief history: I like many others on here began when I discovered BP and was impressed by the amount of education I could get at zero cost to me and was blown away by the generosity of others helping in the success of others. I began educating myself and listened to every podcast a few times and finally got the courage to presnt my findings and plan to my wife. We like many others were very risk averse and lived to the fullest of our means just staying afloat and never having lots of extra money. Once I explained everything to her she understood the black and white numbers REI works on. We're both involved in business for our jobs and have had a small business of our own for a number of years, so we understand the numbers fully.

Next up we partnered with a friend who is an agent and also an investor. He showed us his proprties and drove us through the neighborhood he invest in and explained why he invest there. We looked for several months at properties but didnt find any that fit our criteria. We were driving for dollars one sunday and came across another property we thought would work, contacted my buddy on Monday and the property has already been locked up by another investor. Bummed we went to his office to scour the MLS as he had another agent in his office that had a property listed that was dropping bi-weekly. So we ran some numbers and came up with an offer number that we thought the property might realistically sell for put in an offer well below that price to gauge the sellers desperation.

Ruby Door Properties Name: My wife's favorite color is red, upon a quick search online Red Door Properties was in use already. We were in the car talking real estate returning home from a family trip and Ruby by The Kaiser Chiefs(yeah we love alt/indie music) was on the radio and my wife told me the story of her Aunt Ruby, a Hollywood type who was always glamorous in all things and also sold real estate for a living. So we instantly thought we'd call the business Ruby Door Properties and yes all of our doors will be painted Ruby Red! 

The Property: 1968 pier and beam house, 1344 sq ft. Agent had it listed as a 3/1. Listed in May at 42.9 dropping the price bi-weekly until we saw it at 29.9, we put in an offer of 10k and a few days later the seller came back at 19K. We put in another offer at 17K and it was accepted! We were stoked!

 When we viewed the property we discovered an unfinished masterbath(this could be the reason for listing as 3/1) and knew this would be a huge value add. The master bedroom, master bath and laundry room were part of an addition to the original house. One of the original bedrooms off the living room was opened up and made into a formal dining. We closed up this formal dining room and now we have a 4/2!  

So now you're thinking, what kind of house can you get for 17k, really?? So here she is sitting on her 150 X 50 lot. These befores are pretty rough but saw through all the clutter and could see the potential. First off the floorplan was awesome, split floor plan with a true master suite, vaulted ceiling in the living/kitchen/dining area which was all open like modern homes. Comes complete with an abandoned car in the front yard! 

Laundry

Master Bedroom(after cleaning out tons of clothes/furniture/etc measures 19.5 X 13!! plus the walkin closet

Unfinished Masterbath including brand new tub/shower combo! 

And the sweat equity begins!! 

Filled a 20 yard dumpster in 3 days!

Buh-bye old nasty kitchen!

Framing up Bedroom 4 

Scope of work:

Needs to be leveled and have a beam replaced between the kitchen and hall bath.

Needs a new roof(and resheath the original side of the house, 2/3 of house)

Full electrical update

Full plumbing update

Add central HVAC(was window units only before)

Full kitchen replacement including appliances

Sheetrock 3/4 of house due to damage 

Full paint interior and exterior

Replace most windows

We're giving ourselves 6 months to complete this project. I have a friend who is a GC so he will be helping me out with the things that require a liscenced contractor. 

Our plan to put in tons of sweat equity and try to come in at 50K including acquisition price. This should rent to 850/900 a month and monthly bills will be around 475 a month, cashflowing 375/425 a month. We are using the BRRRR strategy and will get this rented and after seasoning it will pull our cash out and repeat. Our plan is to get 10 properties online in 10 years and then begin to pay them off the next 10 years so in roughly 20-22 years when we retire we should have 9-10K a month flowing in from our properties. We plan to self manage these units to maximize cashflow.

My hope is to post update on a weekly basis as we are working a night or two during the week and working 6-8 hours each Sat & Sun., GC will get his work done weekdays. I hope you will follow us along our journey and perhaps be inspired to take action and get your RE investment career going. All feedback and suggestions are welcome!! Thanks BP community!! 

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Real Estate Investor · Acton, CA · Member since 2014 · 109 posts · 73 votes
9y

@Derek Duplechin I just built a brand new house, in Los Angeles county, and I didn't run any phone lines at all. We have ATT for our internet and phone, but they ran a wireless phone system called U-verse. We plug our home phone line into the back of the wifi router. Anyway LA county didn't require us to put in phone lines, they approved our plans without any. 

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  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y
    Originally posted by @Account Closed:

    Congrats on diving in! I'll definitely be following your progress. I'm curious about your personal criteria for your search - would you mind sharing some details on what the driving factors were in your assessment of what criteria your first property would need to fulfill?

     Keanu, I'm in it for the cashflow, I wanted something near my personal residence and I pay attention to whats happening in the area. The neighborhood I'm in is very much in transition but still under valued. In looking at this property I knew I could get it cheap enough and come out of the rehab for around 50K and that it should rent for around 900, all in with a mortgage, taxes, ins and flood ins will run me about 550 a month so 350 is what it should flow. In my book I'll take as many 350 cashflowing properties as I can get. My goal still is to aquire 10 units and then pay them all off to maximize my cashflow and stay within a self manageable number of units. 

  • Rental Property Investor · New Haven, CT · Member since 2016 · 12 posts · 8 votes
    9y

    Congratulations. Very inspiring.

  • Real Estate Broker · IL · Member since 2016 · 284 posts · 178 votes
    9y

    Keep up the hard work. I've been following. Looking forward to seeing the finished project.

    As of now....what are some things you will do different on your next project?

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y
    John Burtle one thing for sure is that it'll be many properties until I take on another project of this magnitude. The major overhaul here has been a daunting task and I really prefer doing the cosmetic and doing it myself. The mechanicals are not pretty and are costly, kinda like putting tires on your car... In the next few years we'll try to save more for down payments so we can purchase properties that are closer to rentable status upon purchase. It's been a great learning experience so far diving in this deep but I'm really itching to get to the cosmetic stage and see the fruits of my labor. Thanks to all for the continued encouragement!
  • Investor · Hammond, LA · Member since 2016 · 18 posts · 4 votes
    9y

    Hows the rehab coming along?

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y
    @ Ryan Slowly but surely...after getting a couple local plumbers to look at the job both passed on it as I'm sure they can pick n choose jobs these days with all the rehab going on in Baton Rouge after the flood. So I called a friend who's a plumber down in Chalmette, we walked the job on Saturday and he's going to do the work. I'm hoping he can be done before Jan 1, then it'll be onto Sheetrock finally. I've got a couple weeks free from my W2 in January so my dad and I will be killing it over there and hopefully making a lot of progress. Once we're at interior cosmetic I'll be able to be there in the evenings during the week and all weekend. Want to be done done by the end of February and have a tenant by March 1st.
  • Investor · Hammond, LA · Member since 2016 · 18 posts · 4 votes
    9y

    If it doesn't work with that plumber, I know of one in Metairie that may be able to help. Also, have you heard of Thumbtack? It's a website where you put work out there and get quotes and bids for the work from people in the area. If you know a good electrician, can you send them my way?

  • Real Estate Professional · Baton Rouge, LA · Member since 2016 · 109 posts · 30 votes
    9y

    how long do you anticipate the date of completion of full rehab, you seem to be on a journey that has taken you to bigger and better places, what do you plan on doing next for your project & don't stop now my redstick neighbors you just getting your feet wet, keep posting but most of all keep sharing

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y
    Originally posted by @Michael Anderson:

    how long do you anticipate the date of completion of full rehab, you seem to be on a journey that has taken you to bigger and better places, what do you plan on doing next for your project & don't stop now my redstick neighbors you just getting your feet wet, keep posting but most of all keep sharing

     Well it's a moving target at the moment, really going to try to finish up by the end of February but may go into March. Next project will be a duplex in Ruston LA as I will have a daughter in college at LA Tech as of this fall. I'll let her experience on campus dorm life the first year then buy a property there for her to live rent free while the tenants pay the bills :) 

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y

    OK OK don't beat me up too badly for not keeping up with this diary. I worked 6 day weeks at the W2 for 6 weeks, put some time in at the house then took a few R&R days. My dad and I got back to work insulating the exterior walls(house never had wall insualtion) and hanging about 35 sheets of sheetrock. My plumber buddy is getting all of my repipe done this weekend(in the rain it looks like) so hopefully come Monday we'll have that completed. Then my GC is having his real sheetrock guys come in and finish up the hang/float/texture work. Then it'll be onto paint/doors/trim. Here's some pix of the rock work my dad and I did. I think the soffit we built in the living room for the AC ductwork & electricity came out great and looks appropriate for the space. In the interim I scored a free Samsung electric range from a local facebook swap meet page so that'll save me an easy $400 on appliances! Like my wife says "free is always in the budget" 

  • Investor · Anderson, SC · Member since 2016 · 93 posts · 20 votes
    9y

    Just curious on your numbers and also the fact nobody has mentioned it already. You say $900/month for rent and month bills $475/month. What about maintenance, vacancy costs cap ex (Should be very low since this is a rehab)? Are you factoring these in?

    Also, with $67k invested what do you consider the ARV to be?

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y

    Maintenance should be extremely low for the first couple years since the unit will be practically new. I think I have 8% vacancy baked in. My plan is to not take any of the cashflow for personal use but let it snowball as a savings for the next unit.

    Not sure where you got the 67K from but I should be all in at about 53-55K, 17K aquisition and the rest is rehab. I'm hoping at appraises for around 85K, which is in line with sold comps $ per sq ft. in the neighborhood. I want to pull 60K out to pay back my dad and my 401K loan.

  • Investor · Anderson, SC · Member since 2016 · 93 posts · 20 votes
    9y
    Originally posted by @Derek Duplechin:

    Maintenance should be extremely low for the first couple years since the unit will be practically new. I think I have 8% vacancy baked in. My plan is to not take any of the cashflow for personal use but let it snowball as a savings for the next unit.

    Not sure where you got the 67K from but I should be all in at about 53-55K, 17K aquisition and the rest is rehab. I'm hoping at appraises for around 85K, which is in line with sold comps $ per sq ft. in the neighborhood. I want to pull 60K out to pay back my dad and my 401K loan.

     I believe it was the 17k purchase plus your estimated 50k rehab costs.

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y

    Latest update on my seemingly never ending project, yes this is getting to me now and I'm ready to put this baby to bed. My plumber came in a finished up the last wekend in january so we now have water! In the last 2 weeks I had the real sheetrock crew come in and finish hanging/floating/texture the house. This past weekend my dad and I shot 35 gallons of paint and got all of the paint work done. This week my electrician is finishing up putting in all the breakers in the panel/outlets/switches. The I'll need to get Energy out to switch over to my my meter pan for the new panel. Once I've got electricity I'll be able to work at night during the week. Doors/Trim/ Kitchen install will be next on my list for me to do. Last couple pix are of the flooring we'll be putting in, tile in both bathrooms and laundry room, wood laminate everywhere else. Looking like I'll be about a month behind my scheduled finish of end of Feb....I can almost see the finish line...

  • Investor · Tacoma, WA · Member since 2017 · 15 posts · 3 votes
    9y

    Good grief, what a great job this is turning out to be.  pretty inspirational! 

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y

    I know, it's been months since I've updated this post, sorry just been busy hacking away at this house and the W2, and a family etc, you know the drill. So onto the update...

    I've really just been working on the house all weekend every weekend the last 3 months, I've tried to get in a few weekday nights in when I can but its difficult and my timeline has really gotten away from me. Thankfully carrying cost aren't too bad at about 150 a month. I've now got all of the flooring installed, all the doors installed, 95% of the trimwork is done. My wife and installed the kitchen cabs about 6 weeks ago and we installed the countertops 2 weeks ago, still need to install the disposal and plumbing under the sink. My wife is a deal hunter and got us about 30' of laminate countertops from HD for $125! I used the extra pieces as shelving in the hall and master bathroom closets. She also got some killer deals on appliances, a free Samsung Convection oven(wifes favorite saying is "free is always in the budget", this probably saved me $500, got a Kenmore microwave for $40, Dishwasher for $125, and a fridge for $300, obviously all used but in great condition. Just bought my water heater(new) and will install soon. My conctractor friend is installing my outside AC unit this week. This weekend I painted the exterior and boy does that make a difference in curb appeal! It's really coming together nicely but it's been a LONG journey, not one I'll make again, this gut to the studs kinda house just has taken way too much of my time and money. Speaking of money, yeah I'm over budget, I'll come in at right at 60K all in, houses in the neighborhood sell for around mid 60's per square foot so the ARV should be somewhere in the high 80's, still planning to do a cashout refi in the next year or so. Timeline is way out of whack also, almost 8 months in now, hoping to be done now in mid june and hope to have it tenented by mid July at $900 a month

    Updated pix

  • Real Estate Agent · Spring, TX · Member since 2017 · 29 posts · 6 votes
    9y

    Wow! I am so impressed!! It looks fantastic! Love your floor and paint choices!

    I am still trying to find a good property for my first flip. One day soon I hope!  

    Can't wait to see the finished product

  • Investor · Easley, SC · Member since 2013 · 248 posts · 51 votes
    9y

    Congratulations on taking that first step. Please keep us updated and post after project photos to. Good luck!

  • Investor · Jasper GA · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @Derek Duplechin

    The house looks great and I know you have learned a lot.

    I am curious why you installed a garbage disposal and why you are supplying a refrigerator? 

  • Ponchatoula, LA · Member since 2016 · 35 posts · 39 votes
    9y
    Bob B, I know it's probably just one more thing to break but the disposal was only $65 and it's more of a convenience in case we have renters putting who knows what down the drain. Supplying fridge because it'll be a rental, most in my area come with all appliances
  • Real Estate Investor · Seattle, WA · Member since 2016 · 30 posts · 12 votes
    9y

    @Derek Duplechin good for you! Awesome work on that house. You've figured out how projects can snowball in timeline, which is the opposite of the debt snowball your hoping for.  Still, it looks good, and if your numbers are right, it'll be awesome! Congrats.

  • Investor · Tumwater, WA · Member since 2017 · 30 posts · 4 votes
    9y
    So many late nights but it will all be worth it in the end. I love seeing others take on the struggle you learn so much about your property when you do this.
  • Tacoma, WA · Member since 2015 · 141 posts · 29 votes
    9y

    Lot of work...and yes.. you like many others need to do something for retirement. BTW I may have to sub out any reno work because now I am feeling arthritis. That house is cheap!! by west coast means.

  • Flipper/Rehabber · Springfield, MA · Member since 2017 · 106 posts · 51 votes
    9y
    Wow just read the entire post and saw all the pictures the house is coming out nice can't wait to see the finished product !
  • Rental Property Investor · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    9y

    @Derek Duplechin Thank you for sharing your progress and allowing us to follow along the way. You guys have done a great job (the details field reports are solid!). I am excited for your guys!

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