We bought a $253k rental property!

Sharon Tseung 0:02
This is the digital nomad quest podcast with Sharon Tseung. teaching people how to build passive income, become financially free and design their best lives. Hey guys, it’s Sharon Tseung. And today when we talk about how we were able to buy a $253,000 property, which is our 34th unit now, so I want to give a bit of a backstory. So the last property that we bought was actually in June of 2022. So it’s been a long time coming, we already had looked at a ton of properties already. I have a bunch of videos on my phone where we would tour all these different properties, but then we never ended up buying any of them. I know two of them. We made serious offers on them that failed. Another one was in escrow that fell through because the seller didn’t have funds to buy another primary home to move to that one was a long time in escrow and it was kind of annoying basically with that property we were purchasing through a wholesaler that wholesaler gave me that $23,000 deal that I bought a long time ago, he presented me with this other one that I believe was $110,000. And I think Shawn was more excited about that one than I was because it wasn’t in the best area like it would be able to do okay as a rental. But I wanted something in a better area because I wanted to dabble into short term rentals for short term rentals and mid term rentals, I would prefer buying in nicer areas because I think it would do a lot better with those real estate investing strategies. I’ve been wanting to dabble a little more in Airbnb. I think Shawn not as much. But I’ll get into the reason why in a bit. We also had another property that I was pretty interested in. But Shawn didn’t really want it. So we didn’t try for it. It was this larger property with a pool. He didn’t want to deal with pools, but I thought maybe a pool could be good for Airbnb, but I would have to admit that it had a lot of things we needed to fix up in the house. So it might have been a lot of work at the time. And I understand why Shawn didn’t want it as much. So regardless, even if I wanted it, if he wasn’t on board, I didn’t want to try to go for it. Now with this property that we ended up pulling the trigger on I saw this on the MLS for months, it was listed at $339,900. And then months later, I noticed it dropped to $315,900. And then I saw it said it was sold. It was a property I wasn’t like super interested in I was thinking you know what, that one’s probably not worth the risk. The only way I’d want it is if it were at a lower price. So I didn’t really think too much of it. But then I saw a wholesaler listed at a much lower price of $269,000. This definitely piqued my interest because that is a huge price drop. As I kept watching. After a few weeks, it dropped to $259,000. And then at that moment, I decided I needed to find out more about it. But the weird thing was I was having trouble reaching out to the wholesaler and I was having trouble reaching out to the agent like that listing was still there and the listing was still there with the wholesaler it was really weird. They weren’t picking up their phones, they weren’t texting back. Basically, the agent would bring the listing back up, it would say pending, and then it’d be back on the market, the wholesaler continued to drop the price. And I was just like, wow, both parties are just not responding to me. But I know the property is still out there because they keep playing with the listing. So I decided to put in an offer online on the wholesalers website at $245,000. But it was more of a casual inquiry because I wanted someone to just talk to me, I was mainly doing it so I could get on the phone with somebody. Finally, when we’re at the library ready to work, like we’ve basically been going to the library sometimes now to really focus on work sometimes because when I’m at home, I just love playing video games, it’s just kind of harder for me. So we’ve been going to like cafes and libraries sometimes to get stuff done. But basically, when I was at the library, the wholesaler ended up calling us told us that the property was available. And there were a couple of offers. But we were basically tied for first at $245,000. With the offer, I was surprised because I thought oh, I was just kind of putting in a low offer. I didn’t even think that it was something that they would consider. But they said they were looking for 250,000 plus. And then on that day, we wanted to act fast. So we actually went and drove there and decided to check out the property. The property wasn’t too bad. There are things that need to be fixed up. But I thought at this price point, it really made sense. Then the next day, we decided to go to $250,000 hoping they would just take our offer. But we found out there was another party interested, they had to go check it out and then give them a number. So $250,000 Wasn’t one where they could just take it off the market. At this point, I was pretty frustrated. And Shawn was saying he didn’t want the property anymore, which was really difficult for me. And we started fighting because it was something that I really wanted for my goals and the last property that we looked at, he said no to and he hasn’t been wanting to buy something at this moment. Whereas I’ve been like really trying to buy something for a short term rental or a mid term rental. But again, a lot of it is tied to personal goals. So I was feeling like it’s pretty difficult for your partner to not want to go for it while I want to go for it right. I don’t want to make him do something that he’s not interested in, especially with a large financial decision like this. So at this point I started letting go of even the idea of buying it, I didn’t know if it’s gonna happen. I thought, you know, Shawn doesn’t want anymore, I don’t know if we’re gonna be able to go up in price at this point, especially if he’s not interested. But I also started thinking that I need to sometimes just be more resolute with what I want instead of just abiding by others. Sometimes I find that with decisions, it can be hard for me because I want to make sure all parties are happy. So it can be kind of hard for me to put my foot down. So at this point, I decided to tell Shawn, hey, look like I really do want this property. And I told them, I’m trying to put my foot down here. I basically told them of other instances where I wasn’t fully like down but then I wanted to be supportive. So I was so yeah, it can definitely be difficult. If your spouse isn’t on board, and you have to talk facts, you have to talk about the numbers of the property, and you have to talk about, you know, compromising and things like that. Now, let’s get back to the story. Shawn got a call that it went up to $252,000. But since he knew I wanted it so badly, he decided to ask what would it take to lock up the deal, and he was able to get it at $253,000 Done deal. So then my mood completely switched, I was super excited. And we finally got it at $253,000. Now we found out this was actually a daisy chain. So a daisy chain is basically when two wholesalers are involved. So in this scenario, a wholesaler signs the contract with the home seller and then assigns the contract to another wholesaler. And then that wholesaler signed it to us the buyer. So that was very interesting, the closing costs were $2,595.01. And originally it was a bit higher, but we were able to get about $450 off when we looked at the contract because they charged us double on a transaction coordinator fee. So you want to make sure that you always check through the contract, make sure that they aren’t double charging on any fees and things like that. And when we were looking over the contract, it looked like with the two parties involved, one receive $5,000 In assignment fee, while the other got $13,000 in assignment fees, so it didn’t matter to us because we felt good, we still got out a very good price because the after repair value looks like it’s around $400,000. Plus for similar square footage homes with four bedroom two baths. This property is about 2100 square feet. We even spoke with a contractor who’s also a realtor who saw nearby comps at $470,000. And another that was fixed up well as $600,000 or so with similar specs, which is really awesome to hear the area we’re buying in is a good an up and coming neighborhood. So we could flip this property but we plan on holding and renting like we usually do, I really think that this property can appreciate a lot in value, especially because the areas are getting better and better over time. So let’s go over why we bought the property. First off, the numbers look great. So again, $253,000 purchase price around $2,600 In closing costs, and then the ARV is $400,000 plus, that gives us a lot of wiggle room to fix up the property. And it’s not in that bad of condition. Even the rents look pretty high. So on Zillow and rent ometer it’s looking like it can get three to $4,000 in monthly rents as a long term rental, which honestly I was pretty surprised because our bay area home would rent for $3,500 a month. So for us to get it at such a low price point and be able to rent out for that high was pretty exciting for me, I was going to initially do this as a short term rental. But as I researched numbers, it looks like there’s more vacancy than I thought there would be. So I went on Airbnb, I checked the calendar of nearby example listings to gauge the vacancy. So this is where I was kind of like having trouble. I was thinking should I rent it out long term or should I rent it out as a short term and then I realized that furnish monthly rentals do pretty well in this area. So I went on Zillow and I looked and there were furnished monthly rentals going for eight to $11,000, which is insane. If we can get four to $5,000. For this property, I’ll be super happy. That’s why I think we’re probably going to go the midterm rental route, especially as this would be in line with our personal goal of transitioning for our move. So

let me talk about this personal goal, right, I was trying to buy another property this year and Airbnb it out so that I could build the system where I have the cleaners, the property managers and things like that. For one, we move out of this primary home and actually live in Taiwan for a few months. So this is something we’re planning to do. We already bought a one way ticket to Asia. So we’re definitely going to do it. And we’re going to do a language immersion program in Taiwan to learn Chinese. But if we want to do that, I think the financially savvy thing is to figure out how we can rent out this room. So that’s why I wanted to get another home where when we fix it up, we have the team in place to rent it out. We can use that same team for this property when we leave I was either looking for another primary home in a neighborhood we want to live in that works as a short term rental or just buy another round property that would work as a short term rental. So that’s probably what we’re gonna do for now. We’re just gonna rent it out normally as either short term or midterm but like I mentioned, probably mid term based on those numbers and then who knows, maybe we will We’ll move into that property in the future. Instead of this home we’re at right now, normally, we would buy aggressively out of state. But right now we’re more focused on building up our income. And again, we’re looking for something more local. And we also think there is strong appreciation potential here, because home prices have gone down and there is less demand. Like I’ve seen some price cuts and I have seen properties longer on market, we have been focused on saving up cash like for the last year, we just been building up our income and saving up cash. But we were still on the lookout for good deals. So I think this is the good deal for this year, like we’re probably not going to be buying more for now. We’re just going to be focused on our personal goals to enjoy to learn Chinese to travel the world and things like that. Now, after watching the market for seven months or so I have found that the Dallas market hasn’t been dropping as strong as maybe some other markets have. But like I mentioned, I do see some properties longer market seeing some price cuts. But ultimately the properties I was eyeing got snatched up and the prices seem equal to or even higher than what I used to see for the buying criteria I look for I think there are definitely deals to be had this year. And again, this is not investing advice, but I’m definitely going to keep watch on the market. And we’re most likely just going to be sticking to this one property and just working on stabilizing and writing it out. Since we’re on that retirement mode phase. I think we’re just about our personal goals right now, instead of extreme wealth accumulation. So what is going on with the property right now? Well, we’ve been interviewing contractors, we met with about six parties this weekend, and we have another giving a bid this upcoming weekend, we took notes on each contractor and we’re gonna see who we go with some had less professionalism than others. Some came with measuring tape, some came with notebooks to jot down different notes. And we just took note of how each one did we plan on reviewing their bids and also reviewing their references and online presence, but it’s looking like it’s gonna be about 30 to $50,000 in renovations. We’ll see though, because things can always happen and it can increase but if we stay in this range, I think we’re going to be at a good place because that means we’ll be all in at around 290 to $310,000. And we want to hold on to this property for the appreciation potential. We’re also going to go with steadily to insure our property. It’s a great company to help you with landlord insurance and you always want to have insurance in case of anything. So I hope you guys enjoyed this episode. I’m really excited for what’s going to happen with this property. I’m going to try to document as much as I can of the journey and I hope everything works out it wouldn’t be amazing to rent this out at four to $5,000. We did pay all cash for this property so the rental income would be pretty amazing, but we might do a cash out refinance in the future who knows. So I hope you guys enjoyed this episode. Please make sure to rate review and subscribe. It really helps our podcast grow. And thanks again. I’ll see you guys in the next one.

Transcribed by https://otter.ai