Many Hats of Me: Purchased Two Investment Properties!

Wednesday, March 20, 2013

Purchased Two Investment Properties!


Update**

As some of you may have noticed, I had pulled this entry from my blog a few months ago as we started running into problems with financing.

After much legwork, we resolved our financing, and we recently closed on the Red House (yeah!). In a couple of days, we will be closing on the Blue House. It's time to start talking about these properties again, in the hope to provide some helpful information to those who are attempting to purchase a less-than-perfect property.



Two months of searching and numerous trips to the Twin Cities and here around town, we finally found two properties that met my criteria. The houses both have 4 bedrooms and 2 full bathrooms in neighborhoods close to the downtown. Both have yards that are fenced and have garages. Previous owners had made some attempt to modernize these old homes with the introduction of forced air heating in both, and A/C and new windows in one.


The Blue House








The Red House









Older than Methuselah


We also see rather serious negatives in the properties.


Exterior



The exterior entryway of the Blue House is decorated with a half-dead bush, weeds, a broken concrete walkway, and the monstrosity - a poorly built wooden stairway.







In the Red House, fence on either side of the driveway was broken and leaning.






Roofs


The roofs on both houses are very old and in need of repair. A contractor estimated that it will cost 7k to fix the Red House, and 5K the Blue House.





The garage roof is sagging and the shingles are curling




Roof surface is...wavy.


Appliances


Some of the appliances are very old and in some cases abused. I called my Mom and described this washer and dryer, and she replied, "Oh, that's the same age as ours! Don't toss!"





Rusty washer and dryer





Someone took out their frustration out on this dirty stove. 
It actually still works!





I took a quick peek in this freezer. No bodies, yeah!


Mechanicals



We couldn't start the heat in the Red House, so we had to pay a heating and plumbing company to come out at $95/hour to turn on the heat and the water. The plumber found some leaks and other minor problems. The estimated cost to fix is $300.

We found an ancient water softener behind a wall. I suspect that the attached water filter has never been changed. Apparently, these devices are sturdy, so we may not need to replace. Yeah!!





Water Softener


Basements



Houses built in this era have very thick, poured basement walls that are “lumpy”; some, like the Red House, are covered with plaster. They are very strong and stable, just not aesthetically pleasing.






The plaster covering the poured concrete wall is water-stained. 




This is the beaver drain that takes water that oozes from the walls...




and directs it into an open drain on the floor.


Initially, I was quite alarmed by the stained walls, but we learned later that the stains were very old. The beaver drain system has kept the walls dry.

This basement will never be pretty, but we can make it clean! We plan to power-wash the basement floors.

Upfront Expenses


I came up with the following list of repairs that will need to be completed before renting:



Blue House (BH), Red House (RH), both (B)

1. Painting (B)
2. Changing carpets in living room (BH)
3. Cleaning carpet (BH)
4. Replacing stove (RH)
5. Fixing stove (BH)
6. Install dishwasher (BH)
7. Replace stove (RH)
8. Install hard-wire smoke detectors (B)
9. Cleaning (B)
10. General plumbing (B)
11. General electrical (B)
12. Install new roof (B)

To be completed soon:

1. Installing A/C (BH)
2. Replacing most of the windows in the red house with modern, energy efficient windows.
3. Install new entry stairs (BH)
4. Install new concrete walkway (BH)



UP NEXT: financing


More Reading:


Many Hats of Me: Financing the Imperfect Property

Many Hats of Me: Purchasing Investment Properties for the First Time

Many Hats of Me: Twin City Properties - Condos and Sinking Rooflines


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