I bought my first rental for $4,000.

I bought my first rental for $4,000.

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.

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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

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  • Rental Property Investor · West Bend, WI · Member since 2015 · 931 posts · 598 votes
    7y

    @Kelsi Dockins look to the Commercial lending department at a small local bank, they will do in house loans, also called "portfolio" or Commercial Loans, the only loans I have over $50K are Lines of credit, all of mine are sub $50K loans. the terms are usually 3,5,or 7 year rate with 15,20,or 25 year amortization, so every 3,5, or 7 years you renew the loan at current rate, much like an ARM, but this is very common for Commercial, people get confused about borrowing commercial on residential, but, you are owning this property for business, AKA commercial purpose, to make money, this is what professional investors use, and anyone that has maxed out their secondary market financing. I only have 1 Fannie Mae loan and 11 commercial notes and 2 lines of credit, as long as your debt stays low, and you are mindful of your renewal coming up as it relates to market changes (I.E. down turns) you are fine, I never go more than 60% LTV this gives me a 20% equity swing if the bottom falls out of the market, and my lender will still renew at 75% LTV (figuring pay down) hope this helps

  • Seabrook/Galveston · Member since 2018 · 274 posts · 178 votes
    7y

    Are prices much lower for repairs than...everywhere?  If my math is right you would have spent about $10k to do the repairs listed below.  Maybe I’m misinterpreting the extent of plumbing, electrical, and roof work done.  New floor and paint on 2100 sqft I’d expect to be in at $7-8k if it was the entire house  

    “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.”

  • Rental Property Investor · Victoria, TX · Member since 2019 · 11 posts · 10 votes
    7y

    @Kelsi Dockins

    Congratulations, that’s phenomenal to do sight unseen. I am really surprised how much work you were able to get done for $17,000 though. New electrical, plumbing, floors, kitchen, roof and paint on a 2,000 square foot home? That’s 8.5 a square foot. How did you manage that?

  • Member since 2018 · 34 posts · 54 votes
    7y

    The roof is a flat roof, it was about $1800. Electrical was about $5,000. Everything else my contractor did for pretty cheap because he moved in.

  • Raleigh, NC · Member since 2017 · 347 posts · 94 votes
    7y

    @Kelsi Dockins. Did u find all your contractors and Pm on Craigslist without any vetting?

  • Piscataway, NJ · Member since 2013 · 16 posts · 1 vote
    7y

    Congrats.....This is amazing, well done

  • Rental Property Investor · Member since 2018 · 42 posts · 10 votes
    7y

    @Kelsi Dockins

    Wow, I commend your bravery on this one. Your post inspired me to look/sort the way you did.

  • Wholesaler · Durham, NC · Member since 2018 · 157 posts · 50 votes
    7y

    Super awesome and inspiring Kelsi!  

  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    7y

    Great ROI. Warzone?

  • 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

  • Rental Property Investor · Culver City, CA · Member since 2012 · 403 posts · 246 votes
    7y

    Congrats @Kelsi Dockins. Did the contractor send you pics of the completed work? I always demand those before I pay anyone anymore. Learned that lesson the hard way from a contractor I had used successfully a few times before too. 

    Also, be careful letting the tenants do their own repairs. While it can sound like a great arrangement sometimes giving them free license to do things creates much more expensive problems when they move out. I learned that lesson the hard way too. :) 

  • Member since 2018 · 34 posts · 54 votes
    7y

    Thanks Jason, yeah he sent me pictures of the work before I paid. 

    I probably wouldn't do this like this again but it's working this time!

  • Troy BaileyPro Member
    clayton, NC · Member since 2017 · 99 posts · 38 votes
    7y

    Truly amazing! I don't think I could have pulled that off remotely since I don't have that level of trust but I'm very encouraged by your rehab budget. I have a few sub 40k deals on my list but I have been in analysis paralysis on the potential rehab cost. Your story has given me another nudge to pull the trigger on one of them. 

  • Rental Property Investor · Greenville, SC · Member since 2015 · 17 posts · 10 votes
    7y

    Congrats on your successful deal! 

  • Member since 2018 · 34 posts · 54 votes
    7y
    Originally posted by @Troy Bailey:

    Truly amazing! I don't think I could have pulled that off remotely since I don't have that level of trust but I'm very encouraged by your rehab budget. I have a few sub 40k deals on my list but I have been in analysis paralysis on the potential rehab cost. Your story has given me another nudge to pull the trigger on one of them. 

     You got this, Troy! Dive in :)

  • Arlington, VA · Member since 2015 · 60 posts · 100 votes
    7y

    I sincerely hope this works out for you, but... holy cow, talk about a risky move.  

  • Member since 2018 · 34 posts · 54 votes
    7y

    @Bruce C. Hi Bruce, yeah labor was extremely cheap at this property. I do not know if I will get that lucky again! But we did do some trading as well. The contractor did some work for less in order to be the tenant when it was finished. So there was some negotiation there.

  • Los Angeles, CA · Member since 2017 · 16 posts · 11 votes
    7y

    Congrats on your success! Now I'm looking through hubzu. Thanks for sharing your story and introducing me to this website. What's the caveat? 

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