Location was really important to us when we bought this property. The areas we were looking were priced at a premium so we knew we would have to sacrifice a bit of equity. We did the work ourselves to save on labor and ended up being really happy with the numbers. It’s in a quickly growing area, has appreciated well, and it leases out super easily.
We purchased this house for a family member to live in. We learned a lot about working with friends/family. We’ll definitely take a couple things into consideration if we do a deal for family again.
What are your thoughts? Do you mix business with friends/family?
Let’s chat about it below!
Sign. A. Lease. Oklahoma law outlines rights for tenants at will, but there were a couple times paperwork would have made things much easier. More importantly, when you sign the lease you should review it the same way you would with any other tenant. Even if you trust someone fully and don’t want a lease for legal purposes, a well-written lease brings extreme clarity to the landlord-tenant relationship. Can they paint the walls? How about landscaping, can they plant a full flower bed? Can they have pets? If so, how many are you comfortable with? Do they need to pay by a specific date each month or is there flexibility? Who pays for the washer/dryer if it breaks?
Set expectations with repairs. Our family member had a couple maintenance items they didn’t turn in. They didn’t want us to feel like we had to spend more money when we were leasing to them at such a steep discount. We definitely appreciated the thought, but issues tend to get worse (and more expensive) with time. We would have much rather known about the issues early on so we could fix them.
At first we self managed. After a while we had a property manager take over. It made things less personal and more of a business transaction. If we ever do a deal with friends or family again we will for sure have a property manager from the start.
Offer + Negotiations
This property was brought to us by a Realtor before it hit the market. The seller was asking $160,000. We negotiated it down and ended up paying $145,000.
The property appraised for $162,000 as-is when we bought it. Since there was a fair amount of equity we were able to buy this property for almost no money down with a commercial loan from First Liberty Bank. We wrapped the rebab into the loan. Since the commissions had already been negotiated on this one we were able to to retain the commission. This made our cash to close less than $3,500.
Structurally the property was in great condition, but it needed some cosmetic work. We spent ~$4,500 updating each unit. Doing that work allowed us to raise rent from $775/mo to $875/mo. Our family member paid $400/mo. while they lived in the property, but we went ahead and updated that side so it would be able to get $875/mo when family moved out.
Project Start: 4/2/2019
Project Target End: 5/4/2019
Project Actual End: 5/4/2019
Tenant Move In: 5/5/2019
We expected this to take 5 weeks and it did. It helped that the repairs were almost all cosmetic so we didn’t find many surprises.
We did this work ourselves. We wouldn’t have been anywhere near this scope for this budget if we had to budget for labor.
Original Scope of Work
- add insulation
- correct foundation
- minor siding repair
- minor electric work (double tapped breakers, open junction boxes, etc)
- replace all outlets, switches, and covers throughout
- demo kitchens completely
- new kitchen cabinets
- new countertops
- new backsplash
- add floating shelves in kitchens
- install washers and dryers
- stain front cedar posts
- stain back porch
- remove all rocks, debris, and bricks from back yard
- remove raised flower beds from front yard
- install 2″ faux wood blinds throughout
- install new plumbing fixtures in bathrooms and kitchens
- new light fixtures and ceiling fans throughout
- new door hardware throughout
- new bathroom and kitchen hardware
- new paint throughout (walls, trim)
- scrape popcorn ceiling
- new bathroom vanity
Candidly, we didn’t have a super strict scope of work for this project. Consequently, we didn’t have firm change orders either. We do know we ended up upgrading a bit more than we predicted we would. This house was personal so were more willing to make compromises on the budget than if this had strictly been an investment.
|Original Scope of Work||$9,244.42||$9,244.42||$0.00|
|TIMELINE (IN WEEKS)||5.0||5.0||0.0|
|*ARV (AFTER REPAIR VALUE) IS DETERMINED BY THE SALES PRICE OR REFINANCE APPRAISAL|
|**RENT RATE IS THE RATE SECURED AFTER REPAIRS ARE COMPLETE|