Since this new investment property has taken up a large portion of our June and will continue to take much of our time, I’m going a different route with my monthly update. The property is one of the main things we’re focused on right now, so filling you in on the details seems fitting.
I have to be honest. Right now, this house is consuming a heap of my time (and my entire family’s time!). Which means I have very, very little time to blog. I’m doing my best to keep up, but if I have less of an online presence for the next 2 months, read on and you’ll know why! Once the house is finished, things will go back to normal at Centsibly Rich (and I’ll be able to network with my favorite bloggers again!)
Another truth. At this writing, it’s been 2 weeks since we bought the property and it’s been overwhelming. And a little scary. And a complete time suck. I don’t know what fantasy world I was living in that made me think I wouldn’t experience all of this, but it’s hit me hard and I’ve questioned this decision more than once over the last 2 weeks.
But, when I take a step back, I realize that’s why we did this. To let experience be our teacher. And, boy, have we ever learned some lessons! We already know so much about what we will and won’t do if we decide to do this again!
A house full
After our first closing was delayed due to the tenant not vacating the property, we finally closed on the house June 12. Though we weren’t shocked, the house still had a ton of “stuff” in it. We didn’t change the locks for the first two days to allow the tenant and the neighbors to come back and get what they wanted. But we were still left about 2 dumpsters worth of stuff to get rid of (and that’s not including the free stuff on the curb!).
When we looked at the property, we knew we weren’t seeing the whole picture – because of 30+ years of stuff stored in the house. We were mentally prepared for surprises but I admit, on our first day, I questioned my sanity and wondered why we would ever want to take this on.
The place stunk (bad!) from a combination of dog urine, dog feces and the mouse droppings everywhere. With all that stuff in the house, we didn’t previously notice the prevalence of mouse poop (and the smell wasn’t as bad!?). We knew the dogs had done a number (actually #1 and #2) on the house, but it was worse than we thought (I think they went everywhere BUT the grass – in the house, on the deck, in the mulch!).
So day 1, we walked in, filled a couple of garbage bags, said screw it and went home, wondering why we got ourselves into this.
Day 2 rolled around, I dealt with the first issue (electric hadn’t been run to the new A/C unit) and we started cleaning out what we could. We felt a little better about it. Though we knew we had our work cut out for us, we still felt like the house would be a decent rental property. We also knew we would be putting a ton of time into getting it ready to rent.
Days 3 – present are a complete blur. The first 1 ½ weeks involved much time cleaning out and hauling. Once we got all the stuff and nasty carpet out, we could start our plan for renos.
I think I rework the budget every single day. Even though we knew we’d have to spend thousands to get the house up to par, the saver in me has a hard time with that aspect of it. And we could spend so much more than we have budgeted doing all the things that could be done. We’ve been working on a strategy for the best use of the budgeted money.
Since this is a personal finance blog and all, you probably want to see some actual numbers here, right!? Here you go…
Purchase Price: $92k
Estimated cost of repairs: 25k
Total estimated cost: $117k
Estimated rent: $1200 (average is around $1230 for the size of house and area)
Amount financed: $69k at 4.5% (P&I: $350/month)
As an aside, the property is assessed by the county at $131,700. Houses in our area typically sell for over assessed value right now, when they are in good condition. Plus, the property is located in a desirable, central neighborhood in the metro area. With this information, we feel okay about putting the money into modest renovations.
Since we are doing some of the work ourselves, we’ll also have to make a payment or two and pay the electric and water bills as well, which will definitely cost us. But by allowing more time, we will be able to do more of the work ourselves and save on labor costs.
The original house was built in 1919 and was added onto – but we’re not sure exactly when. It is an old house, no doubt. But for being almost 100 years old, it’s structurally sound and has some charming characteristics (brick arched wall!).
Here’s the good things we (probably) won’t have issues with anytime soon: brand new HVAC, brand new roof, sewer line and water lines replaced approximately 3 years ago, new driveway 3 years ago.
At this time, the following is what’s on our list to work on:
Flooring. We thought we made a great discovery when we pulled up the nasty (NASTY) carpet and found hardwood flooring. And it is decent, but the time commitment involved in refinishing it isn’t worth it to us right now. So, we’re installing all new flooring.
Siding/stucco/stone. Before painting the outside, we will repair cracks in the stucco. We also discovered a spot in the front of the house that is rotting, so we will remove it, replace it with new wood, and install new siding over that portion of the front. (We hope to contract some of this work out)
Landscaping. We took out three trees in the front, and are cutting a ton of branches off large trees on the property. We took out a chain link fence, power washed the back deck. The front deck needs repaired before we wash it. Several hostas and lilies were scattered throughout the yard, so we relocated them around the house. We will have the huge stump out front taken out and will redo the front landscaping after we get the siding work done.
Walls. New drywall in most of the house. At this point, we’re getting bids. This is expensive!
Electrical. The house still has some of the old knob and tube wiring, so we will hire an electrician to get it up to code (this is expensive too!)
Kitchen. New everything. Well, some things will be used, but new to the house – thank goodness for Craigslist and the Restore. We are removing a wall, moving doorway and adding an island. (Most of this we will do ourselves)
Bathroom. New everything.
Basement. Install larger sump pump and clean it. Yuck. Maybe some paint too.
That’s just the major things. There are so many little things – like trim, paint, doors, etc.
Looking at that list exhausts me. But we’re really determined to stay within our budget, which is why we’re DIYing what we can.
I’m grateful it’s not just Alan and I working on the house – it’s the entire family! Our kids are paid to help and our parents volunteer a ton of time (especially my dad – thanks dad!). We will enlist the help of some neighbors and friends on occasion. And we will contract out some of the more technical, time consuming work.