Ryan loves naming our rental properties and the funnier the better. I call it my ugly baby. Big Horn is the third rental property purchase transaction and the fifth rental property at this time.
We bought this rental property for $65,000. It needed a lot of work, but surrounding updated properties were selling for about $130,000. The house next door had just been flipped and so this seemed like a steal.
While the numbers made a lot of sense, one thing that bothered me (still does) was the shape of the house. It is a weird box-like shape. Thankfully, it’s not the only house in the neighborhood.
The house has a metal roof and siding so it is pretty sturdy.
Financing The Purchase
We had just completed a cash-out refinance with our duplexes so we had $58,000 available to us. This was supposed to go towards the personal loan we took out for the down payment of the duplexes, however, we decided to reuse the funds and go through the cycle again.
The remaining cash came from a private investor (a friend) that gave us a $20,000 loan. We agreed on 12% interest with monthly interest payments and one final payment at the end. This would be more than enough to cover the purchase and some renovations.
The Rehab Process
Our initial estimated rehab budget is $23,000. The main items for rehab were the kitchen, flooring, and bathrooms. We had planned to outsource a lot of the work, but as quotes from contractors came in, we decided to start doing some of the work ourselves.
As of the date of this post, we have spent $17,235 in renovation costs and we are about done.
Given that Big Horn is our first hands-on rehab project, I have been documenting this project as we go. As of the date of this post, we are approaching the finish line and will write up a concluding blog with before and after pictures.
The Long-Term Goal
We are into the business of fixing and renting, so this was bought with that strategy in mind.
Once renovations are completed, we will be hiring a management company that will take over the placement of the tenant and management.
For all of our other properties, we have opted for self-management, however, we have decided to give it a try. We want to be more hands-off moving forward.
We will then refinance with Fairway Lending vía the Fannie Mae Delayed Financing program. This program lets us refinance a property and take cash out without waiting the 6 months seasoning period that most banks require. We are currently on the hunt for a lender that doesn’t have such requirements. We just need to put in the work.
With the loan proceeds, we will pay our friend and do it all over again!
I can’t wait to share my final numbers! Stay Tuned!
Update: Go to the following link for the final results. Big Horn Property- Deal or No Deal?