Market 2, update 07

Things are really starting to come together at my second house on Market Street. We just finished week 11 and its starting to look like a home again. Let me back up a bit. On week two we ripped it down to the studs or the lathe in most of the house, in order to change the layout of the house. We removed the bathroom, added a closet, did all new plumbing, removed a chimney, added a whole new bathroom in a new area of the house, repaird the foundation, rewired most the whole house, and a million other things which really didn't change the look of the house.

So basically we've been staring at old studs and lathe boards, and some crappy plaster here and there for the last 11 weeks. Well finally we're drywalling like madmen and we got the bedroom drywalled and most of the dining room drywalled this week. It's finally starting to look like a house again, instead of a demolition site! That is exciting, because I can actually start to see the end of this project approaching. We've still got a LOT of work to get done, but at this point theres much less to do than we've actually done, so thats nice knowing we're way more than half done and on our way out.

I'm pushing to have it rentable by May 1st. There is a lot of outside work to be done, but I'm hoping to get the inside all done by my May 1 deadline, and then we can put siding on the outside and do something with the front porch. It will be very rewarding to have completed this house, because it was such a big and challenging project, I now know that no matter what, I will always be able to make money in this industry, provided I buy houses that need everything done to them, if bought at this price.

I've now experienced both sides of the spectrum of purchasing investment property. You can buy a house that only needs a little work, or you can buy one that needs everything. There's pro's and con's either way. On the former, you can get it done in a month or so, and get it rented and start making money right away. With the latter, sure it takes a lot longer to get it done, but you can pay yourself a salary to fix it, and everything is brand new when your done. You won't be able to add as many houses to your portfolio annually doing it this way, but I think the flip potential is much higher. Also if you buy a home for very cheap, your taxes will be lower as well.

I'm hoping to find deals that aren't as bad as Market 2, but not as nice as some of the other ones I bought. Somewhere in the middle. A 2-3 month project I think will be ideal. That way I can redo most the finishes of the hosue, like new siding, new flooring, paint, and maybe renovate the bathroom/kitchen, etc. But not have to completely build a house from scratch practically like we are on this one. Would I do another house like this one? You bet. Its going to cash flow great and not need any work for a long time, so I still think its a good invesment.

Market 2 Update 06

Well things are coming along fantastic at the 2nd Market Street Property I am working on. In just two days I primed the whole bathroom, textured the ceiling, painted the ceiling, and painted the walls, and I've started putting tile down and trim, and the accessories such as light switch covers. We also hung two doors and got a bunch of other work done. This bathroom has been a monster of a project, so completing it this week (or nearly so) will be a huge milestone for us.

I've been wanting a nice chop saw. I've had the pleasure of using one of those nice dewalt ones. My real estate mentor loaned me an old one he bought about 30 years ago when he was starting out, and its on its last leg. That thing sucks wood into it, or throws sparks, etc. So I've put up with it, its much better than nothing, or trying to use a circular saw to cut your framing, but this old saw in in no way good enough to cut the miters for trim. So when I was at home depot the other day, I was in the checkout line and lo and behold, they had a Ryobi chop saw for just $109 bucks! I'd never heard of Ryobi and at that price I figured it was pure garbage. But I took a chance and bought it. This thing is not only a very fantastic saw, it has a laser beam to boot! It can cut miters at two angles, and will make my trim perfect. I used it to cut some trim tonight and wow, this thing is going to make the job way faster (used a hand miter box before), but way way better. You really can't shave off 16th of an ince with a hand saw to get the perfect cut. So I'm really happy with my new Ryobi chop saw.

The house is starting to come together though. My mentor warned me of this place being too much and that I'd burn out, but I'm determined to prove him wrong that it was indeed a fantastic investment, and that I'll get it done under budget and under the time estimate. I'm falling in love with this house though, and tempted to just move in, lol. I just need to take the time to renovate my house properly and I'd be more than happy here.

Market 01, Before and After

I was digging for some pictures and put some before and after pics together of my first Market Street rental property.

I was particularly impressed with how that house really shaped up nice. Vinyl siding and some new trim and paint are a miracle worker for the old tired home.

Anyhow, I plan on doing more of these before/after compilations as I complete my homes. My duplex is about half done, and my new project called Market 02 is about half done.

Here is the before and after image: http://www.joelhuenink.com/uploaded_images/1534%20Market%20Transformation.jpg

Optimizing Properties for maximum cash flow

One thing I like to do when I buy a property is to not only improve the appearance by adding new vinyl siding, repairing any issues, new paint, etc but now I'm into changing the floor plan to maximize the homes appeal and potential income. My first few projects I just overhauled the bathrooms so they were really nice. New tile, new toilets, complete paint job, improved lighting are typical standards, but now I'm into complete floor plan changes.

For example, bedrooms = money. Pure and simple, no matter how nice your one bedroom is, your rent potential will always be less than a two or three bedroom. After taking a closer look at my duplex, which has a huge dining room and a misplaced living room off to the side after walking into the dining room when you come in the front door, I figured I'd make that living room into a bedroom and delete the dining room and call it the "living room". Then upstairs has a very small space which is almost a poor excuse for the smallest bedroom ever, but there is attic space right behind it, so if I take down a wall and make a bed cubby hole, I think I can call this place a three bedroom, and then instead of getting 375 rent for it, I think I'll be able to get 495 a month instead! Not bad for 1 wall, and a door in a place I'll already be renovating. The first month of rent will probably cover the materials needed to convert it into a 3 bedroom.

Over the course of 30 years, that little addition will make me an extra 43,200. I just got the property for free, in essence. At some point I will add a two stall garage, allowing me to get another 75 per side, creating another 150 a month or 54,000 in 30 years. So with two simple changes, and probably only about 10,000 dollars total investment in improvements, I'll make nearly 100k of extra money. Thats quite a few nice extra vacations or a couple of kids through college.