I bought my first rental for $4,000.

Real Estate Deal Analysis & Advice
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I bought my first rental for $4,000.

Kelsi Dockins
Member since 2018 · 34 posts · 54 votes

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $4,000

Cash invested: $17,000

Bought this baby for $4,000 on Hubzu.com in November 2018. Rehabbed from Washington State. Was done and rented by March 2019. Used cash so it is all paid off and now renting for $650 per month.

What made you interested in investing in this type of deal?

Honestly, I had been looking to buy a foreclosure in Washington State for 2 years and finally gave up. I went to Hubzu and sorted price from low to high. This property was one of the cheapest foreclosures in the nation. I bid and I won.

How did you find this deal and how did you negotiate it?

Hubzu.com, I was the only one who bid.

How did you finance this deal?

I used cash

How did you add value to the deal?

Fixed roof, re-ran electrical, new electrical panel, new flooring throughout (ceramic tile and laminate), new plumbing in bathroom and kitchen, everything in kitchen new, painted.

What was the outcome?

Rented at $650 in 4 months

Lessons learned? Challenges?

Every time a contractor was paid, they disappeared! I would definitely be more cautious about contractors and I never made a trip down to see the home, so next time will walk the house before buying. I got super lucky!
Mistakes I made: Laying ceramic tile instead of linoleum. Maybe should have done carpet instead of laminant. The house is 2,100 sq ft so even cheap flooring was pricy.
Positives: The jobs were itemized with the contractor and I only paid each line on completion. This worked out r

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I represented myself and the other agent was pretty terrible on a $4,000 home.

26Reply
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Most Popular Reply

Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y

I just bought a big single family 2 bed for 10k recently so I share your joy . I'll have about 2k in rehab . These cheap houses are just too good to pass up . The ROI is insane if you can play the game right . Don't listen to the naysayers or frightened people ,Buy up as many as you can and sit on them . Rehab them right ,get a good tenant in and keep buying them . Your going to have people tell you that your foolish and taking on risks buying at this price point ..but put the blinders on ,stay laser focused and repeat the process

2Reply
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  • Joe Norman
    Property Manager · Baltimore, MD · Member since 2014 · 1k+ posts · 1k+ votes
    7y

    Great return!  How far away from the unit do you live and how often were you able to see it?

    0Reply
  • Alicia Andry
    Omaha, NE · Member since 2019 · 5 posts · 8 votes
    7y

    This is amazingly impressive! I second Joe's question...how far away from the unit do you live? I have been watching several auction sites including Hubzu but have not bid yet. I live in Omaha, NE, which is a crazy market right now. I'm finding it difficult to find deals, even on the auction sites or local wholesalers. I've been considering a foreclosure in other markets, and would love to hear more about how you made the rehab work, what challenges you faced due to your distance from the property, etc. Thanks for sharing this! It's really inspiring!

    0Reply
  • Matt F.
    Rental Property Investor · St. Louis, MO · Member since 2019 · 162 posts · 72 votes
    7y
    Originally posted by @Kelsi Dockins:

    Investment Info:

    Single-family residence buy & hold investment.

    Purchase price: $4,000

    Cash invested: $17,000

    Bought this baby for $4,000 on Hubzu.com in November 2018. Rehabbed from Washington State. Was done and rented by March 2019. Used cash so it is all paid off and now renting for $650 per month.

    What made you interested in investing in this type of deal?

    Honestly, I had been looking to buy a foreclosure in Washington State for 2 years and finally gave up. I went to Hubzu and sorted price from low to high. This property was one of the cheapest foreclosures in the nation. I bid and I won.

    How did you find this deal and how did you negotiate it?

    Hubzu.com, I was the only one who bid.

    How did you finance this deal?

    I used cash from previous sales as a Real Estate Agent in the Greater Seattle Area.

    How did you add value to the deal?

    Fixed roof, re-ran electrical, new electrical panel, new flooring throughout (ceramic tile and laminate), new plumbing in bathroom and kitchen, everything in kitchen new, painted.

    What was the outcome?

    Rented at $650 in 4 months

    Lessons learned? Challenges?

    Every time a contractor was paid, they disappeared! I would definitely be more cautious about contractors and I never made a trip down to see the home, so next time will walk the house before buying. I got super lucky!
    Mistakes I made: Laying ceramic tile instead of linoleum. Maybe should have done carpet instead of laminant. The house is 2,100 sq ft so even cheap flooring was pricy.
    Positives: The jobs were itemized with the contractor and I only paid each line on completion. This worked out r

    Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

    Me! Just kidding. I represented myself and the other agent was pretty terrible on a $4,000 home.

     Congratulations Kelsi!  I haven't heard of Hubzu.  I'll have to check it out!

    1Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    Hi Matt,

    It is an online auction site. I feel like it is better than auction.com. Auction.com seems to be able to up bid on the properties itself. I have put many bids in on auction.com and lose to see them come back on! 

    I will say, the hubzu process took 2 months and was a little frustrating but I think this was more of a title and escrow issue. I would suggest getting your own title and escrow and not going with the ones hubzu provides.

    All in all, I would use again! Let me know if you have any questions, I would love to help! Have you bought auction homes before?

    6Reply
  • Ehsan Rishat
    Specialist · Carlsbad, CA · Member since 2018 · 1k+ posts · 638 votes
    7y

    Congratulations on this great deal!

    0Reply
  • Maria Luna
    Rental Property Investor · Altamonte Springs, FL · Member since 2018 · 185 posts · 97 votes
    7y

    @Kelsi Dockins

    This is great girl, congratulations!! I live in Washington state and can’t find anything cheap here anymore. I’m gonna have to check out this website. If you don’t mind me asking, where in Washington is this property? I live in lacey.

    0Reply
  • Tanya Rooney
    Flipper/Rehabber · Roseville, MN · Member since 2018 · 73 posts · 38 votes
    7y

    @Kelsi Dockins. Sweet deal!! Congratulations. Is it in a rural area or in the suburbs? Did you use local contractors and where did you find them if the property isn’t close?

    Woo!

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Tanya Rooney Thank you! It is in a suburb of St. Louis, MO. The neighborhood is not great from what I hear but i got lucky and all the neighbors own their homes and there are no vacant homes on the street! I used a local contractor from craigslist. I am glad the contractor is from the area, he said it was a dangerous neighborhood and if you are not from there might run into trouble. It worked out good though!

    3Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Ehsan Rishat Thank you!

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Alicia Andry I live in Washington State and the house was in St. Louis, Mo. Sooo.... about 2000 miles. I was lucky to find a local contractor who really helped out. I still have not seen the home, so am a little worried about the quality but it is rented! 

    I had quite a few challenges. One big one was the time difference! Contractors were calling at 5am and 6am asking questions! Home depot was amazing. I would order everything and get it sent to the contractors so they didn't even have to pick it up. 

    Big challenges were cultural. Every time I paid any contractor whether it be electrician, roofer, framer, every time I paid someone they disappeared for a couple days and then came back and finished the work. This could have been because i didn't verify them but it was interesting that it was ALL the workers. 

    Looking back, I should have flown out and looked at what work needed to be done but I trust my contractor and for the most part, things worked out!

    5Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Joe Norman I live about 2000 miles away and have never seen it.

    2Reply
  • Daniel Whitmore
    Rental Property Investor · Los Angeles, CA · Member since 2019 · 78 posts · 40 votes
    7y

    @Kelsi Dockins

    This is an incredible achievement! I’m new to BP but this is the kind of deal I dream of. I live in LA and am priced out of this market. I don’t think I could ever have the confidence to buy a foreclosure property without first seeing it but maybe this a mental obstacle I need to overcome. It seems as if so many things could have gone wrong.

    I’m so glad it worked out for you! With monthly expenses factored in, will this cash flow nicely right out of the gate?

    1Reply
  • Account Closed
    Investor · Boston, MA · Member since 2018 · 61 posts · 46 votes
    7y

    This is the kind of deal that gives people in pricey markets hope! Congratulations Kelsi!

    0Reply
  • Ida Fogle
    Member since 2019 · 6 posts · 0 votes
    7y

    Congratulations Kelsi!! That is an amazing deal!

    0Reply
  • Matt F.
    Rental Property Investor · St. Louis, MO · Member since 2019 · 162 posts · 72 votes
    7y
    Originally posted by @Kelsi Dockins:

    Hi Matt,

    It is an online auction site. I feel like it is better than auction.com. Auction.com seems to be able to up bid on the properties itself. I have put many bids in on auction.com and lose to see them come back on! 

    I will say, the hubzu process took 2 months and was a little frustrating but I think this was more of a title and escrow issue. I would suggest getting your own title and escrow and not going with the ones hubzu provides.

    All in all, I would use again! Let me know if you have any questions, I would love to help! Have you bought auction homes before?

     Thanks Kelsi!  That's good to know.  I'm just starting out, so no auction homes yet.  In terms of risk, I assume you're not exactly sure about what all is wrong with the property you're getting?  (no opportunity to inspect or do contingencies right?)

    0Reply
  • Jim Chuong
    Rental Property Investor · Toronto, Canada · Member since 2012 · 102 posts · 95 votes
    7y

    @Kelsi Dockins that’s frickin awesome! Thanks for posting. You’re amazing!

    0Reply
  • Account Closed
    Rental Property Investor · Sacramento, CA · Member since 2015 · 1k+ posts · 893 votes
    7y

    @Kelsi Dockins you went all in buying a 4k house out of the gates! Especially a large, cheap home.  Good work lol. 

    Hopefully vacancy doesn't become an issue. Way to jump right into the water.

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    It was really exciting at first, then really scary! I wouldn't do such a large one again. Am defintely worried about vacancy but got lucky that all the neighbors own their homes! Can you tell me a little about your Investments? Any pointers?

    0Reply
  • Matt McConkey
    Rental Property Investor · Phoenix, AZ · Member since 2015 · 222 posts · 126 votes
    7y

    @Kelsi Dockins what neighborhood in St. Louis? When I saw the photo, I instantly thought it was St. Louis.

    I presume you have property management in place?

    0Reply
  • Alexander Lang
    Rental Property Investor · Savage, MN · Member since 2016 · 202 posts · 61 votes
    7y

    Congrats! that is a great story, thanks for sharing! 

    1Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Jim Chuong Thank you! :) 

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Alexander Lang Thanks! How's the market in Minnesota?

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Matt McConkey, It is in Kingsway East neighborhood. It is a little south of Ferguson. I do not have a property manager in place yet. Tax wise, if it was passive income I couldn't write everything off right away. I plan to get a property manager, current tenant is a contractor so we have an agreement on anything that comes up. I know this doesn't always work out, but so far so good!

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Matt Ferch In terms of risk, yeah, you are not supposed to walk or go in the property however, some are also listed on the mls and can be opened by an agent. There are no inspection contingencies BUT you can make it contingent on a title search. This will provide an out if there is a discrepancy on the title report. For example, I bid on another house in Birmingham, AL. There was a picture of the house, inside and out. When we got the title report, it stated that the house had been demolished by the city! So I was able to get my earnest money back and move on.

    0Reply
  • Kelsi Dockins
    OP
    Member since 2018 · 34 posts · 54 votes
    7y

    @Daniel Whitmore I am in the same boat. Washington is SO expensive even for rural areas. It was pretty nerve wracking not seeing the property but I have been looking for 2 years and not doing anything! I was just like now or never! And if it failed, yeah $4,000 is a lot of money but it wouldn't put me out. 

    Monthly expenses just include insurance which is about $160 and taxes are $380ish a YEAR! I think the taxes went up already because it got reassessed from the county assessor but still very low. I am somewhere netting $450 per month. I was also able to get approved for a loan for $150,000 more than my previous approval because of the cash flow!

    2Reply
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