Rental House #75 – A Perfect Flip
Time to Talk About “Current” Rental Houses
As I dig through the archives of my brain trying to piece together the history that makes up each of our deals over the years, I had the chance to watch the movie Memento. While the plot does not apply here, the way the director, Christopher Nolan, weaves us through the plot DOES apply. He shows you the end at the beginning, and then throughout the show, he goes back and forth before ending up in the middle at the end of the movie. That got me thinking, and we are going to start presenting more current deals as well as they are fresh on the brain and will hopefully show you exactly how a financial snowball can become with a little time and effort.
Rental House #75 4919 “Overdrew Dingle”
November 2019
This house we once again found through yellow letters. The owner initially called us, and we could not agree on a price, we were too far off. However, sever
al months passed, and Dave called him back to follow up. Well, a lot had happened in that time, and the owner now had a tenant not paying rent and being a general pain in his rear. This house was in good shape, as you can see in the before pics below, and had a pool. The quality of the house meant we “could” potentially pay a little more as the house wouldn’t need as much rehab to stabilize. Dave was prepared to offer him 105k, but while talking, the owner blurted out, “Well, I couldn’t take less than $95k.” Boom! We had a deal at $95k. $10,000 better than we thought. I guess throwing out the first number is sometimes dangerous!
We closed quickly by paying cash, and at closing, the owner’s wife was so grateful to be rid of this “nightmare” house. All I could see was $$$. We then made contact with the tenant. This situation was a strange one, as the tenant immediately started pulling out all kinds of legalese terms, e.g., “I signed under duress” and “you can’t evict me, this lease isn’t valid.” While this initially sounds scary, Dave was a master and diffused it with ease. He stayed firm but kind throughout the process. The prior owner had made the mistake of having the water in his name the whole time and had the tenant pay him for water. He shut that down as soon as he sold it. The tenant was behind on rent by, and at the local water provider, the owner has to sign an agreement to pay if the tenant does not. While these agreements are potentially risky, we still have to sign them so that our tenants can get water. We told the tenant we’d sign it if she’d catch up on rent. Well, she wouldn’t pay. She then threatened to bathe her kids in the pool, trying to make us feel bad. We held steady, and it looked like we were at an impasse.
Bribing the Tenant
It was apparent the tenant could not pay rent. In a last-ditch effort, we decided to offer her deposit (which we received from the prior owner at closing) if she would move and leave the place broom swept.
She took the bribe. She left in just a few days, and we were half convinced that after she cashed her deposit that she’d try to move back in. However, to our delight, she was permanently gone. We quickly sent our handyman over to change the locks and put a lockbox on the door. We were now officially in rehab mode.
House Before Pics
Property Rehab Time
This property we were always going to be a flip because it had a pool, and it met our flip criteria. We don’t like renting houses with pools because, in our experience, pools are way more maintenance and liability than the little extra rent they bring in. Dave and I walked through the house after the crazy tenant lady moved, and we made a list of exactly what we were going to do.
- Paint the entire thing – cabinets, walls, trim, doors. Mindful Gray SW7016 for walls and white for cabinets and trim/doors
- Replace all outlets/switches to new white and add dome lights in all bedrooms. Replace patio fans
- Change faucets in bathrooms
- Add carpet over parquet floors in bedrooms
- Clean up yard/pool
- Deep clean house
- Repair some drywall spots
On this property, the rehab was small enough; we could piece it out to our various contractors. So we started texting and got them all lined up. Here’s what everything ended up costing us. The entire process was very smooth, and we had zero surprises this time.
| Rehab Category | Rehab Cost |
|---|---|
| Paint Entire House | $1800 |
| Appliances | $650 |
| Floors | $1800 |
| Yard/Junk Removal | $1100 |
| Electric | $1500 |
| General Repairs | $800 |
| Make Ready Clean | $250 |
| Pictures | $125 |
| Fence repair | $285 |
| Pool checkup | $175 |
| HVAC Tuneup | $150 |
| Total | $8635 |
After Pics of Flip House
Listing the Flip House
Dave and I are both licensed agents, so we listed this property right away after rehab for $159,000. This property was priced perfect for sale in our farm, and we were hoping for a quick sale. We knew we priced it right because we were getting 4-5 showings a day. In our experience, to get the best chance at an offer, you need dynamite pictures and a price that is dialed in. After three days, we got an offer for $153,000. We settled on 155,000 and promised them we’d do some minor repairs. We banked about $40k on this one after we sold. On to the next one!
Final Net Worth Numbers
We crossed the $2.2 million mark for net worth with this deal. Pretty incredible.
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