We bought a $65K house.

Sharon Tseung 0:02
This is the digital nomad quest podcast, Sharon Tseung. teaching people how to build passive income become financially free and design their best lives. Hey guys Jaron from digital nomad quest,

and today we’re gonna talk about how we purchased a $65,000 home and what we’re going to do with it. So in this episode, we’re gonna go over how we found the deal, visiting the property and giving a tour of it, what we’re going to do with it and make sure to stay till the end, because we’re going to talk about the numbers and how much we think we’re going to make on it. So I had been itching for another project, we were looking online for different properties in different cities in Texas. And then I randomly was looking on bigger pockets and came across one that seemed to make sense numbers wise, we had a low price point. And it wasn’t a city that we were interested in. And we hadn’t had a property in that city before this property is small, it’s close to 900 square feet, but not quite. And it was listed as a three bedroom one bath, it was listed as $65,000 by a wholesaler who was part of a company who unfortunately had multiple wholesalers trying to list this deal and sell it and if you guys don’t know already wholesaling is basically when you sell a contract to purchase a home, and then collect an assignment fee for that the job of wholesalers is to find these off market deals. So they’re doing a lot of marketing to get this contract, and then they sell that deal. So they’re not actually owning the home unless you do a double close where you purchase it and then sell it right away. But usually they’re getting like an assignment fee instead. So we contacted the wholesaler, we’re interested in this property, we ended up driving the next morning to that property. And it was like a two hour drive. So it was quite a commitment. But that home turned out to be a two bedroom, one bath instead of a three bedroom, one bath. So it started looking like maybe this isn’t the right deal for us. And on top of that, it turned out that there was competition for this deal. So a different wholesaler had a potential buyer who made an offer, but it was contingent on them looking at the property first. So we said hey, look, we’re gonna offer 72,000. But it turned out that the offer from the other buyer had fallen through probably they checked it out in person and decided it wasn’t for them. So with that in mind, we decided to lower our offer a bit and then ended up at $65,000. Because we knew the market was declining. And that property was a two one instead of a three one like advertised, we knew that they were probably trying to get this property off their hands, especially now that that offer had fallen through and that it wasn’t actually a three one. So after some negotiating back and forth, we were able to purchase the deal. Now when we were at the property, we noticed two people actually going to the property as well, trying to get the deal it seemed like but as we talked to them, we found out one was the contractor the other person had left already. And basically that buyer decided that the property was too small for their tastes. But the contractor had already toured the property and they kind of talked to us about the numbers of what it could look like and how they could potentially do it. For us. There’s a lot of stuff left in the house and smelled really bad. And basically there was like a pile of poop in one room. And then there was an unflushed toilet, you can see cigarette stains all over the walls, there’s a little den next to the kitchen, and there’s a bunch of soda cans and stuff like that on the ground. So that was kind of weird. It was just tons of stuff. And I felt really uncomfortable in the house. I was just surprised that anyone could live like this in the house, what we found was the bones were pretty much okay, but there’s some issues with foundation also is missing an H back system. So some of these things would be costly. We decided to move forward to that contractor we had met up with and we visited again. In the second visit, it seemed like some things were hauled off, but there wasn’t too much done yet, we almost threw up because we couldn’t be in there that long. It the smell got way worse. And every time I went to that property, I felt like I needed to shower like crazy. Now one thing we noticed was because the property was deemed a three one but it was actually a two one we didn’t notice that den next to the kitchen and decided maybe we can convert this. So that’s kind of the plan right now to convert that little den into another bedroom even though the layout would be kind of funky because it’s right next to the kitchen and the back we just thought that having an extra bedroom would increase the property value. Another thing was this chain link fence. As you can see on the outside, it didn’t look very nice. So we thought maybe we can remove this and possibly remove the ramp going up to the house. Now another thing is I kind of wanted to try like a farmhouse style look. So I wanted to make the property white and then maybe with black accents and cedar wood accents as well. So we’re going to kind of experiment a little bit with different colors. Initially, we’re going to do a darker wood floor but we’re hoping to do a lighter wood because I think it would give a little bit more of a soothing environment in such a small space like this. And then with the kitchen here I was thinking maybe darker kitchen counters like maybe a darker Navy but I decided that maybe we should do white counters with light wood countertops that way especially with the small spaces, I think it would open it up more and make it look a little bit more spacious. So so far, a lot more trash was hauled off. We were able to fix the foundation problem and then some of the walls have been textured and on the outside some of the paints been done but what we noticed was it’s been about two months and it feels like there hasn’t been enough work done, which kind of concerns us right now the expected renovation totals supposed to be around 35,000, including appliances, but it could potentially become more, we will see over time. So let’s break down the numbers here. So the purchase price was $65,000. Closing costs were $1,101.20. So because we did all cash, the closing costs were a lot less. And then like I mentioned, renovation costs might be $35,000 or more, we put in $6,000. So far, we’ll see how much it becomes later. I think it could go up even more than $35,000. But I’m hoping to keep these low. Because this property is so small, it’s under 900 square feet, I think it really comes down to what’s going on with the contractor. We’re hoping that we can speed this up, but only time can tell we’ll see what happens after repair value should

be around $130,000. It could go up to $150,000. But I’m trying to stay conservative. So to be conservative, let’s say that we spent $65,000 Plus that $1,101.20 In closing costs, which makes it $66,101.20. If we add maybe $40,000 In renovation costs, that would equal $106,101.20 in potential amount that we put in and that doesn’t include some costs like property taxes and insurance that we still have to pay right now. ARV, let’s be on the conservative side, let’s say $103,000. So if we subtract the ARV, an estimated amount that we’re going to put in that number is around $23,898.80. And then if we do account for property taxes and insurance, let’s say it’s around $2,000. That’d be around a profit of $22,000. If we decide to sell however, I don’t think we’re going to sell this property we initially wanted to Airbnb this property at the time of purchasing it. The idea was that the housing market was getting shifty. We weren’t sure what was going on. But we did want to pursue another project and potentially Airbnb it out. We wanted something at a low price point where it’s not too much risk if anything went wrong and we could test different contractors but basically when we checked the city’s Airbnb laws word that you can’t have an Airbnb within 500 feet of another Airbnb. So we checked that and it seemed okay on the website, when we call the city we found out there was another property in progress to actually become an Airbnb in that vicinity. So that meant that we can’t have an Airbnb with this property, which was really a huge bummer. But because of the low price point, and because the numbers kind of makes sense, we figured that we can make this become a midterm rental or a long term rental and worst case scenario, if we are having difficulties, we could potentially just resell this property, we could do a vis bow like basically for sale by owner look on some Facebook groups, sell it to another person who would want to flip it. So there are a lot of these other exit strategies that we are entertaining in case anything goes wrong. But right now, we’re not going to make any quick changes to our strategy, we are potentially going to do midterm or long term rental with this and possibly do a cash out refinance, making this a bird project instead. So as you guys can see, there are these different strategies. And we’re not completely set in stone with the current plan yet. It just depends what’s going to happen, how long renovations take, if the numbers make sense, if we decide it makes more sense to sell it, we’ll see what happens. But ultimately, I do think it’s a good idea to keep this one because I do you think the city is going to increase in value with housing prices. And I always kind of like to keep my properties because in general housing usually goes up in price, especially if you are looking for markets that have job growth, population growth, lower crime rates increase in housing prices, and this market especially has seen all of those factors. So this has definitely been an interesting project, I really hope we can make it that cute farmhouse style look, because I was doing a lot of experimentation doing a lot of photoshopping of the pictures. As you can see, it’s a bad photoshop job. But it kind of shows the colors that I want and the vibe that I want. And it’s pretty fun to kind of manage the renovations more closely like this. Whereas in the past a lot of our projects, we kind of just worked with a pm to help us get the property rent ready for tenants and they would determine a lot of what that would look like. So with our latest projects, like the moldy house, we have been choosing colors, we’ve been picking out materials and just getting more involved in the process because I think it’s all learning process and we’re getting better and better with each project. So if you guys are trying to get into real estate and do things like this, it’s always good to take action and learn from experience. I hope you guys enjoyed this episode on our $65,000 property. 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