House #20 Gaining Steam with the Buy and Hold Rental Houses
January 2015
I know its been a while since our last recap on house #19; however, life got in the way with soccer games, kid’s concerts, and weddings. You know, all the things that we are trying to focus on instead of working or making money, but let’s get back in the saddle.
Another Buy and Hold Rental House
I’m excited today to talk about 29330 Archived Bookers. This is a three bedroom two bath house with a partially finished garage that has an odd room that acts as a 4th bedroom (it’s cooled). It has about 1,500 sqft and is on a quiet street in one of our better neighborhoods in the farm as it is zoned to highly rated schools in the area.
We found this house on the MLS, it needed work, and that 4th bedroom made it weird for most buyers as now it only has a one car garage. We low balled them and got the house for $89,750, and we got 3% back as the buyer’s agent at closing, so this meant our actual price was about $87,000.
Financing the Rental House
Here’s our HUD for this sweet purchase. We used our wealthy friend’s money to purchase this with cash and then promised him 10% APR and guaranteed at least three months of interest payments even if we financed it out into a longer-term loan before the three months were up. He loaned us $80,000, and we kicked in the rest and money for rehab from our Line of Credit (LOC). This type of payment means we paid “cash” for this house and that always makes closing easier.
HUD
Before Pics
Not much going on here… Super 80s, super awesome.
Rehab
As you can see in the table below we had almost $12,000 in rehab/holding costs in this one, no huge surprises, but we did demo that weird half brick wall and we cleaned the tile/grout rather than replace it. We also decided to replace the electric panel as it was the original and all the outlets and switches inside. We also replaced the water heater; it was leaking.
| Line Item | Cost |
|---|---|
| Carpet and Tile Clean | 2580 |
| Lanscaping | 100 |
| Paint | 1600 |
| Water Heater | 581.65 |
| Garage Door | 375 |
| Lockbox | 37.53 |
| December Interest | 197.26 |
| January Interest | 679.45 |
| February Interest | 613.7 |
| March Interest | 109.59 |
| February LOC Interest | 561.41 |
| Supplies | 324.87 |
| Cleaning | 135 |
| Utilities | 220.89 |
| Handyman | 1274.7 |
| Electric Panel and Outlets | 1800 |
| Pictures | 100 |
| Blinds | 36.25 |
| Toilets | 327.24 |
| Window Repair | 19.63 |
| Kitchen Faucet | 121.96 |
| Total | 11,796.13 |
After Pics
Rental
After just a few days of completing the rehab, we got this house listed and rented for $1,250 per month. This rent amount makes our rent to price ratio pretty stellar at 1.25 ($1250/100,000). Now we need about 25 more of these!
Long Term Financing
Once we got the renter stabilized and we were making some sweet cash flow, we called up or banker and got this house ready to get a longer-term loan setup. This note was a 20-year loan at 4.75% and had a 5-year rate. This note was a $591 a month mortgage payment. It would then reset to whatever the going rate would be in 5 years. Closing costs for this loan are minimal again as this is portfolio loan with a small regional bank. The only downside is that the rate isn’t fixed for 30 years. However, no bank is going to guarantee a rate for 30 years as the US government does. Here’s the HUD for this “finance.” The other downside to this method of “closing” this house twice is that we have to pay title insurance twice. Seems silly as we are technically insuring it from ourselves on the first purchase. Nevertheless, we think it’s worth it to do this way, as we got 76k of our initial 90k back. We used that money to pay back our hard money friend and pay down our LOC.
Good to go for the next one!
Finance HUD
Net Worth Update
Hey there! Thanks for the time you spend on these posts. We are flippers/rehabbers from Columbus, OH. We are fairly new, but have a handful of projects under our belt. I had a couple questions about your expenses if that’s OK. Some of my questions are minutia, but we’re really trying to cut costs and it seems like you’re nailing it!
1) How’d you get a garage door installed for $375!?
2) How many blinds did you get for $36?
3) How did you repair a window for $20
4) I assume your interest payments varied because 2 of the months were prorated?
Thanks again!
Hey Harvey!,
It was just a single door for the garage. That’s what we typically pay here in Houston. A double door would obviously be about double. The old door was super damaged and beat up. Blinds are super cheap at Home Depot. This was for 3 bedrooms and the living room. So probably 5 blinds. The Window was a single piece of glass that our handyman bought and charged us 20 bucks total to install. Yes on the interest payments!