It’s hard to imagine it was more than a year ago when I first went to walk our house on Somerset. A lot has happened since then, including our first eviction, and having our second ever (still to this day… knock on wood!) theft.
So how has it performed since then?
Overall, it’s turned out quite well.
Once we evicted the non-paying tenants we’d inherited, we did a cosmetic rehab. We spent a total of $14,775.69 doing the follow:
- Painting the entire house
- Tiling the kitchen floor
- Glazing the kitchen counter top
- Glazing the bathroom tile
- Updating bathroom floor tile
- Refinishing hardwood floors throughout
- Finishing work like light fixtures, new blinds, vent covers, and other odds and ends
Here are some before and afters:
We finally got the house rented by April 1st. It would have been sooner, but we were out of town from mid-February through mid-March. I guess that’s the drawback of managing your own properties.
The house is rented for $950 now which is a solid move up from the $800 it was previously rented for.
Checking on the financials
Unfortunately, we still have a little over $20,000 cash locked up in this one. We initially did delayed financing and were left with just $10,000 locked up. But with the cosmetic updates coming after that, we weren’t able (or at least it didn’t make sense) to refinance again later.
Here’s a look at the change in cash invested and debt:
Accounting for capex, repairs, vacancy, and PITI, it would take us about 38 months to get our money out of the home. That’s a long time. But that’s not how it’s going to happen.
Sweet sweet comps
The neighborhood this home is in has started to really heat up in the last few months. I expected this, I just didn’t expect it so soon. It was clear prices and rents were increasing, but last month it became indisputable when the home two doors down was sold to an owner occupant for $112k. The rehab wasn’t even that great.
Half a block up, on our same street, another home sold for $115k. Same story in terms of the rehab. So at this point we’re confident it’d be worth it to refinance once again. This time we’re hoping we hit at least a $100k appraisal. If so, we’d walk with a check of about $40,000 and have all of our money out and then some. We’re working through the refi process now, and I’ll update once it gets over the line.
Lessons in looking back
I’m obviously thrilled we purchased this home, and I’ve fallen in love with the area since. But if I had to do things differently, I would NOT have done delayed financing.
Knowing what I know now, I would have banked on our inherited tenants not lasting. I knew they were notoriously late with the previous owner, and I was hopeful we could whip them into shape. While we managed to get two months out of them, I should have realized it wasn’t going to last and planned for it.
So I would have waited for the tenants to turn over, done the cosmetic updates, and then refinanced. Yes, it would have taken at least six months, but the appraisal probably would have come in around $65k at that time which would still leave us with about $7,000 in the deal, but we’d get all of that out via cash flow in just over a year.
This is why I prefer to buy them empty. That’s not necessarily a hard rule, but I do prefer it. That said, if something is in great shape, in an area I love, and has tenants… I’ll do that deal.
Somerset fit that mold but most don’t.