I Invest In Real Estate
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If you are interested in real estate investing, here is how it works.
This house, that I am currently renovating, is a good example. Most people, when they buy a house, want to move in, maybe do some painting and landscaping, but not much more than that. They want to unpack their stuff and get back to normal, not embark on a major construction project. This describes the vast majority of buyers.
At the same time, for various reasons such as divorce, financial troubles, inheritance or a job transfer, some homeowners find themselves with a house that they can't sell to a normal buyer, usually due to its bad condition. They don't have the funds or the motivation to fix up the house. They just want out.
I bought this house through the MLS and never spoke to the sellers. However, from the closing documents, it is easy to see what happened. The woman who owned the home did not have the funds to fix up the house and it deteriorated to a very bad condition -- a kitchen from the 1950s covered with grease, a hole in the bathroom floor, leaking roof, and a living room ceiling about to cave in. She died, leaving the house to her heirs who did not want the house. They listed it well below the market.
As an investor, I did some simple math. I looked at the house, which was listed for $40,000. Working with my realtor (who is also my property manager) we ball-parked that it would cost $30,000 to do a nice renovation. I also saw that there was a back room with trees going in through the ceiling that could be converted into a utility room/full bath making the house a 3 bed/2 full bath house -- my favorite as a landlord. I conservatively estimated that once it was repaired, the house would be worth $100,000 and rent for $900-1,000 a month. If all went as planned I would end up with $30,000 in equity in the house, plus a gross income stream of $12,000 a year in rent. If my numbers were way off, even by $10,000 for repairs, I would still have the income stream and $20,000 in equity.
I made a cash, no-contingencies offer and got the house. As of today, with most of the big expenses - HVAC, electrical, roof and plumbing-- done, my costs are at $27,368.26. We will probably go over the $30K mark, but the market has shot up in the past few months raising the value of the house, so I am not concerned.
The heirs are happy because they got a full-priced cash offer. The neighbors are happy because the house is being fixed up. I will end up with a nice investment property.
If you are interested in real estate investing, here is how it works.
This house, that I am currently renovating, is a good example. Most people, when they buy a house, want to move in, maybe do some painting and landscaping, but not much more than that. They want to unpack their stuff and get back to normal, not embark on a major construction project. This describes the vast majority of buyers.
At the same time, for various reasons such as divorce, financial troubles, inheritance or a job transfer, some homeowners find themselves with a house that they can't sell to a normal buyer, usually due to its bad condition. They don't have the funds or the motivation to fix up the house. They just want out.
I bought this house through the MLS and never spoke to the sellers. However, from the closing documents, it is easy to see what happened. The woman who owned the home did not have the funds to fix up the house and it deteriorated to a very bad condition -- a kitchen from the 1950s covered with grease, a hole in the bathroom floor, leaking roof, and a living room ceiling about to cave in. She died, leaving the house to her heirs who did not want the house. They listed it well below the market.
As an investor, I did some simple math. I looked at the house, which was listed for $40,000. Working with my realtor (who is also my property manager) we ball-parked that it would cost $30,000 to do a nice renovation. I also saw that there was a back room with trees going in through the ceiling that could be converted into a utility room/full bath making the house a 3 bed/2 full bath house -- my favorite as a landlord. I conservatively estimated that once it was repaired, the house would be worth $100,000 and rent for $900-1,000 a month. If all went as planned I would end up with $30,000 in equity in the house, plus a gross income stream of $12,000 a year in rent. If my numbers were way off, even by $10,000 for repairs, I would still have the income stream and $20,000 in equity.
I made a cash, no-contingencies offer and got the house. As of today, with most of the big expenses - HVAC, electrical, roof and plumbing-- done, my costs are at $27,368.26. We will probably go over the $30K mark, but the market has shot up in the past few months raising the value of the house, so I am not concerned.
The heirs are happy because they got a full-priced cash offer. The neighbors are happy because the house is being fixed up. I will end up with a nice investment property.
