Rental House #35 – Finally Another Deal Off the MLS

8-2016

Read about House #34 to catch up on our story. House #35 comes to us courtesy of the MLS. We regularly check our local MLS on har.com to see the cheapest houses in our “farm” area. Most of the time, there are no deals, but once in a while, a jewel appears.

23406 Galena Doodle.   This property has three bedrooms and two baths and was built in 1977. It has almost 1670 square feet. We followed the BRRRR Model on this one, which is Buy, Rehab, Rent, Refinance, Repeat. We even did the R’s in order this time.

Buy (Brrrr)

Dave had to fight hard on this one. Since it was on the MLS and listed to sell, we had to act fast. Dave offered $83,500, but we weren’t the highest offer. The agent called to let us know, and Dave offered his 3% commission to him if he could get the owner to take our offer. We also put up 10% earnest money. So, in the end, this greased back used car salesman of a seller’s agent sold his integrity for $2,500 bucks and got the seller to take our offer. Boom. Here’s the HUD statement from the original purchase.  The place needed some love. See the before pics below.

Before Pics

Rehab (bRrrr)

We sent our guys over to the house, and it cost about $16,500. We painted, put in a new floor, new HVAC, spruced up the yard, a new roof, and a few other things.

Here are our exact costs for our rehab.

Rent (brRrr)

Once we got it rehabbed, we listed on the MLS for rent and listed it for $1,195. This amount meant a rent to price ratio of 1.2 (1,195 / $100,000). That is a solid base hit in baseball terms.

Rental House #35 Pics

Again this was one where we took our own pics, which are substandard, but we haven’t had to rent it since, so we don’t have fancy pictures yet.

Refinance (brrRr)

Now that we have “B”ought, “R”ehabbed, and “R”ented, it was time to “R”efinance and get most of our money back. Remember, we used $83,500 of our own money to buy the property, then another $16,500 to make the house rent ready. We called our go-to lender and gave them the address and told them it had a tenant. They did a drive-by appraisal and determined the home was worth $130,000. This valuation means the bank will lend us at least $95,000. This amount covered all of the original cost ($83,500+16,500 rehab) plus some.

The note for this loan was 20 years at 5.125% with a monthly payment of $633.54

Here’s the HUD statement from our refi. You can see it cost us $1537 to do the refi.  We left about 5k in this deal. This amount was due to the roof replacement. We didn’t plan for this, but our insurance company made us replace it. Remember, though, this follows our theory that no significant surprise should cost more than about $5,000. We used the loan money to pay off our lines of credit and HELOC. Ready to find the next one!

Repeat (brrrR)

Don’t worry; we’ve done this since house 27; we will continue using BRRRR on house #36 and beyond.

House #35 Net Worth Update

We are cruising right along on the net worth train. Always good when you buy a property at a discount.

2020 House #35 Update

This house now rents for $1,299 , which makes our Rent to Price ratio now 1.3 = 1,299 / 100000. As rents go up, your rent to price ratio should too. This fact is why we never want to sell anything. We track all our progress through our handy Cash Flow Tracker.

We’ve also made $2,900 cash flow over the years, and our principal paydown has totaled $18,333. Plus, the house is worth about $150,000, meaning our trapped equity is around $73,000.