I have been through a lot of changes recently as you can see from my last update article. I am still trying to keep up with my goal to buy two more long-term rental properties this year, and I just had an offer accepted on a property last Friday! I have had to adjust my buying strategy and raise my prices because there are so few properties available right now. Prices and rents are also going up, so my returns should be very similar to my current rental properties.
What are the details on rental property number 8?
I will give some rough numbers on this potential rental property since it is not a done deal yet. The contract price is $97,500 with the seller paying 2 percent of my closing costs. The home is a REO and was on the market for 95 days, which is an eternity in this market. The home will have 5 bedrooms, 2 baths and was built in the early 1970’s. It needs work, but finding any house under $100,000 right now is difficult. I am surprised this home did not sell quicker than it did.
I did not do anything special when making an offer on this one. I did try to send in a low-ball offer, which was rejected. I submitted a higher offer a day later and I was notified that there were multiple offers. I raised the purchase price quite a bit for highest and best and was countered again by the seller. I guess I was the highest offer, but still not high enough. I still did not want to pay full price, so I countered them again and they accepted.
Why was this good deal still available?
The marketing on the home was less than stellar. The home was listed in June and the date-stamped photos in MLS had snow in them. It has snowed here in June before, but not for about 12 years. The photos were from April and the home was not clean. When I showed up to look at the home, there was no sign in the yard, and no one would have any idea it was for sale unless they saw it in MLS.
The home is also listed as a 3 bedroom, 2 bath in the MLS, when it actually has 4 bedrooms with an office. The office can easily be converted into another bedroom, making the home a 5 bedroom, 2 bath.
What is this rental property worth?
We just sold a fix and flip on the same street earlier this year for $134,000 and that was a 4 bedroom, 2 bath. Another house just sold in the area for $158,000, but I can’t believe it sold for that much. I am counting on this house being worth at least $140,000 after it is repaired. I estimate it will take about $15,000 in repairs to get it ready to rent. We will have to move a couple of doors around in the basement, new paint, floor coverings, fixtures and a lot of little things.
What kind of loan am I getting?
I am going to do a 30 year ARM loan again on this property. I will have to put 20 percent down and with the repairs a carrying costs, I will have about $35,000 cash into the property.
What will this rental property rent for?
The home should rent for at least $1,200 a month after it is repaired, but I may do something different with this one. There are still many flood victims in the area without a place to live while their homes are rebuilt. I may rent it temporarily to flood victims right away without completing all the repairs. I need to talk to the organization running this program to get all the details on how it would work.
When will I close on this property?
Closing is set for the 28th of October. I will add all the details and pictures as soon as the home closes. I am going to keep an eye out for more rentals and try to get at least one more before the end of the year.