House Hunt: Round 2

A lot has changed in the last year! Many of you are new read­ers since then (super hap­py you’re here!), so you might not know I attempt­ed to buy a mul­ti-fam­i­ly rental prop­er­ty about this time last year. For­tu­nate­ly, I doc­u­ment­ed the entire saga so you can quick go back and refresh what hap­pened to me last time I tried to buy.

I don’t con­sid­er the last time as a fail­ure though. It taught me a lot of great lessons: how to act around the seller’s agent whilst view­ing the prop­er­ty, what lev­el of ser­vice to expect from a real­tor, how to fill out all the paper­work, what to include in the paper­work, what the process of sub­mit­ting an offer looks like, how to set­tle on a price, and what to expect from get­ting inspec­tions sort­ed out and more.

Now that I have been in my new town for two months and have set­tled into my new job nice­ly, I decid­ed it was time to start look­ing for prop­er­ty in this area. Start­ing the process was as easy as ask­ing peo­ple who they used as a real­tor and find­ing one who under­stood the investor side of buy­ing prop­er­ty. I was moved at MegaCorp’s behest, so they’re pay­ing for basi­cal­ly every­thing. They gave me a ton of mon­ey to move here, and will also be cov­er­ing my clos­ing costs. I can­not state how awe­some that is since that’s about anoth­er $8k I’ll get to keep in my pock­et.

My goal this time around is to find a 3–4 unit mul­ti-fam­i­ly prop­er­ty that meets the 1% rule. I will also be fol­low­ing the guide­lines list­ed in Step One of my first post on start­ing the house hunt, with a few small changes:

I will pur­chase one prop­er­ty with a pur­chase price of $155,000-$225,ooo not to exceed $100,000 once every 24 months. I will finance the prop­er­ty using a VA Loan with a 5% 10% down-pay­ment. Depend­ing on total pur­chase price, I will bud­get for up to 2% in clos­ing costs and no more than 3% in repairs max­i­mum. The max­i­mum all-in cost includ­ing down pay­ment, clos­ing costs, and repairs should be no more than $15,000. [With clos­ing costs reim­bursed after close].

Fun­ny how much hasn’t changed in a year. Same goal, new loca­tion.

So I went on the hunt. This search is incred­i­bly dif­fer­ent from the last one. There are TONS of prop­er­ties on the mar­ket. Not only are there tons of prop­er­ties, but 93.4% of them meet the 1% rule, and 40% of them almost meet the 2% rule. [Note: %‘s are entire­ly made up. Just know if I wasn’t afraid of break­ing a win­dow, I’d throw a rock and hit a prop­er­ty that at least met the 1% rule.]

My awe­some new real­tor set me up with an auto­mat­ic search that pushed new list­ings straight to my email. I could check the new prop­er­ties out while sit­ting on the toi­let at the lunch table. One prop­er­ty caught my eye so I emailed my real­tor and asked to set up a show­ing. They can require any­where from 24–48 hours pri­or notice if they have exist­ing ten­ants, so then I had to wait. Lat­er that day, anoth­er prop­er­ty a few blocks away popped up so I asked if we could see that as well.

The first prop­er­ty is a duplex. The list price is $119,000 and rent is $1465/month. I wasn’t par­tic­u­lar­ly enam­ored with the prop­er­ty for sev­er­al rea­sons. The first, it was only a duplex and I want one with at least 3 units. Sec­ond­ly, both units were occu­pied and due to get­ting VA financ­ing, I need a prop­er­ty with an open unit to move into. Third, the low­er unit ten­ants had lived there for 7 years and didn’t wish to move, but I wasn’t sure I want­ed to deal with them and their at least 5 cats. I couldn’t keep track of them all dur­ing the show­ing. The upper unit wasn’t any­thing spec­tac­u­lar.

I was a huge fan, how­ev­er, of the orig­i­nal car­riage house in the back­yard. Not a huge fan of the cat that fell out of the loft and scared the liv­ing bee­jee­bus out of us though! Good thing it has 9 lives because I’m pret­ty sure it used up a few. It would’ve been real­ly awe­some to ren­o­vate the car­riage house into a lit­tle apart­ment or even super sick work­shop space, but it would’ve cost $$$$$ with very lit­tle return. Not about that life right now.

The sec­ond prop­er­ty is a triplex (win), has a list price of $79,900 (dou­ble win), and rents out for $1485 a month (TRIPLE WIN). 2100 sq ft of his­to­ry in a beau­ti­ful house. There are two good ten­ants in it right now pay­ing $1100, which leaves a stu­dio apart­ment emp­ty (WIN X5). The house is in fan­tas­tic shape con­sid­er­ing it was built right after the turn of the cen­tu­ry. The last one, not the most recent one. A new­er roof that includes new sheath­ing, high effi­cien­cy fur­nace, new plumb­ing, and new elec­tri­cal. [Should I count that as one big win, or lots of lit­tle wins?!].

The seller’s agent let us know there had been a show­ing right before us, with anoth­er sched­uled the next day. The poten­tial buy­er had pre­vi­ous­ly been inter­est­ed, so the agent let us know they would be sub­mit­ting an offer. If I want­ed a shot at this house, I had to move fast.

Which is why.….. I sub­mit­ted an offer yes­ter­day after­noon! Even bet­ter, the sell­er accept­ed my offer last night!

So...... that means........... I'M BUYING A HOUSE. AHHHHHHHHHHH!!!!!!!!!!!!!!!!!

If it seems sud­den, that’s because it is. The whole process, from con­tact­ing the real­tor to get­ting my offer, took a week. That’s it. 7 days.

Like I said, it could not have been a more dif­fer­ent expe­ri­ence than last time.

I am THRILLED TO DEATH GUYS. But also scared­hap­pyex­cit­ed­pet­ri­fiedanx­ious.

It’s fine. I’m fine. I can do this. deep breaths

Let me intro­duce you to my prop­er­ty to be!

Yes, this beau­ti­ful Neo-Geor­gian Revival house only cost me $85,000. I love liv­ing in the Mid­west! Coastal peeps — what do you think this prop­er­ty would go for in your neck of the woods? Shoot me a com­ment!

If you’re say­ing, wait, I thought the list price was $79,900 you’re right. I offered over list due to the com­pe­ti­tion I was fac­ing. Appar­ent­ly, the sell­er had 3 prop­er­ties to sell, not just one, a fact I dis­cov­ered as I was head­ing into the office to sign my offer. Every­one else put in a bid for a pack­age deal for all 3 prop­er­ties. I was the only one that want­ed just one, and I offered over list.

Did I over pay a lit­tle, con­sid­er­ing there was no counter offer? Prob­a­bly. But the num­bers still work out.

The sell­er liked a num­ber of things about my offer.

  • I loved the house for being a well-pre­served, beau­ti­ful piece of local his­to­ry.
  • I want­ed to live in the house.
  • It was my very first prop­er­ty. Every­one else was an investor.

I didn’t even have to write a super cheesy let­ter to the sell­er! The seller’s agent liked what I had to say and passed those feel­ings on to the sell­er.

Being a good per­son still helps, even in 2017.

So now that I’ve waxed poet­ic about my crazy last week.….… what’s next?

Paper­work. Lots and lots of paper­work.

Since every­thing moved so fast, I have a lot to do. I need to sched­ule inspec­tions to take place with­in the next 14 days (don’t for­get the 48 hours of notice to the ten­ants), scout around for the best deal I can find in regards to financ­ing, get home­own­ers insur­ance, and get ready to move my stuff into a stu­dio apart­ment. All of this has to be done in the next 7 weeks, because I close March 24th!

Thank you to every­one that fol­lowed along the my rental jour­neys! I tru­ly could not have done it with­out your sup­port, guid­ance, advice, and encour­age­ment. It real­ly does take a vil­lage.

Stay tuned as I go through the process!

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51 thoughts on “House Hunt: Round 2

  1. it’s pret­ty unusu­al to find these types of mul­ti fam­i­ly units around these parts. Lots of mas­sive hous­es. lots of big apart­ment com­plex­es. Lots of con­dos and town­hous­es. Basi­cal­ly, lots of devel­op­er cook­ie cut­ter cre­ations from the past 30 years. I think because Cal­i­for­nia as a state is so much new­er than some of the oth­er states, but I did notice some 4-plex­es in some of the old­er coastal towns, but I have to imag­ine they cost at least $500k and prob­a­bly over a mil­lion for the ones that had ocean views. And maybe I’m under-esti­mat­ing those num­bers big time. I remem­ber a 4 plex in San Clemente…I’d say each of the 4 units rents for $1,500-$2,000 per month. And those are the real­ly old units with no A/C.

    Con­grats. How are the 3 units sep­a­rat­ed here? Does every­one go through what looks like the front door and then the units have inter­nal access doors? Are the units sim­i­lar­ly sized? I’m so curi­ous, but I’m sure you’ll have plen­ty of posts in the future.

    The paper­work sucks. Dur­ing my inter­view with Joshua, I was lament­ing how all the paper­work with the short sale was so frus­trat­ing (such a first world prob­lem) and almost made me nev­er want to deal with buy­ing real estate again. Fun­ni­ly, I didn’t mind the paper­work so much when sell­ing. 😀
    TJ recent­ly post­ed…The Bank Account Bonus That I Won’t Be Churn­ing.My Profile

    • Yikes those are expen­sive. This house is over 100 years old and some­one hacked it into a mul­ti­fam­i­ly. The bot­tom floor is one unit (2 bed­room) and the sec­ond floor is split into 2 units (one 1 bd, and one stu­dio). The rents are $600, $500 and $385. Most peo­ple access the house through the back doors, but you can go through the front door as well.

    • Thanks Julie! I had some areas of town that I refused to even look at due to safe­ty con­cerns, but any oth­er neigh­bor­hood was fair game. I just looked at all the prop­er­ties as they appeared! Loca­tion is pret­ty great. Not too far from the local chi­ro­prac­tic col­lege, down­town, and shop­ping!

  2. In my part of LA Coun­ty you’d prob­a­bly be look­ing at $500k-650k for a prop­er­ty like this. It would prob­a­bly rent for $2500–3500 per month.

    • Eeks! Avoid the ghet­to! The ghet­to around here costs about $50k for a prop­er­ty like mine.

      Rent is pret­ty high, all things con­sid­er­ing. I’ll get $600 for the 2 bdrm, $500 for the 1 bdrm, and $385 for the stu­dio when I’m not liv­ing in it. Actu­al­ly prob­a­bly a bit more once I make some small improve­ments.

    • I know right!? Like, why did the sell­er want to get rid of it, and two oth­er prop­er­ties?! Makes me slight­ly sus­pi­cious, tbh.

  3. That’s such a great deal!! Holy moly. There’s NOTHING even com­pa­ra­ble in Vegas to this deal. All the mul­ti fam­i­ly home units are in the worst parts of town and some­thing like this would cost some­where between 200–300k (with the worst ten­ants imag­in­able). I don’t think I’ll be able to keep up with your plan, darn it!

    Are you pay­ing for it out­right or financ­ing? Inter­est rate? Give us the nit­ty grit­ty!

    • Yikes! This is in a good neigh­bor­hood too. Tru­ly a win on every front. I didn’t include much about the financ­ing because that hasn’t been set­tled yet.

      Ten­ta­tive num­bers are 10% down with a rate of about 3.625%. I haven’t shopped around yet much but will be get­ting that set­tled this week.

  4. CONGRATULATIONS!!!!! I remem­ber the elat­ed feel­ing of find­ing some­thing after look­ing for oh-so-long, so I’m so hap­py for you! And holy cow, that house is freakin’ gor­geous. It looks like a doll house. :3 It’s fun­ny because that price is excel­lent even in Texas, where prop­er­ties are still pret­ty afford­able. Go you!

    How is the house sec­tioned out? Just curi­ous how the rent­ing is going to work out. Con­grats again!
    Mrs. Picky Pinch­er recent­ly post­ed…The Picky Pinch­ers’ Jan­u­ary Bud­get ReportMy Profile

    • Thanks!!! I’m so in love with my ‘Paint­ed Lady’. It’s been bro­ken up into 3 units: the bot­tom floor rents for $600, and the sec­ond floor has been split into a one bed­room unit @ $500 and a stu­dio for $385. That’s $1485 alto­geth­er but I will be liv­ing in the stu­dio so I’ll only get $1100 a month until I move out.

    • Thanks Mag­gie! Seems like more peo­ple want to live in Alas­ka than the Mid­west. Also prob­a­bly hard­er to get sup­plies up in the wilds of the North!

  5. Any rea­son you do not put 20% down to avoid PMI? As an investor that real­ly hurts the prof­it mar­gin. Do VA loans not require PMI?

    Con­grats on the house. I am very inter­est­ed in a mul­ti unit for my next pur­chase. I cur­rent­ly have 5 sin­gle fam­i­ly homes.

    I def­i­nite­ly agree with the mid­west pric­ing though. It is great bang for your buck. I see peo­ple on HGTV pay­ing $400k for homes I buy for about $40k. Things are mov­ing up though.

    • Hi Travis, VA loans have no PMI and no mon­ey down if that’s what you want to do. There is a small fund­ing fee but noth­ing major. Oth­er­wise yes I would’ve gone with the full 20% to avoid PMI. Thanks for com­ment­ing!

  6. Con­grats Gwen! Sounds like an awe­some invest­ment.

    For $85K I’ll take 5 please! You asked about what some­thing like this would cost on the left coast. Wild guess is over a mil­lion in Seat­tle right now.

    I looked up my house in Red­mond on Zil­low and Zil­low says it is worth $710K which it could prob­a­bly sell for that but def­i­nite­ly not worth it! Zil­low says the rent would be $2800/month and an “Upscale Major Kitchen Remod­el” is $127K for the house/area. Now before you facepunch me, my costs are about the same as it would cost to rent a one or two bed­room apart­ment. Depend­ing on what you get a one bed­room apart­ment in Red­mond might be $1700/month. Stu­dios with no park­ing are $1100/month. You might be able to save a bit of mon­ey if you down­grade to the moldy, crack house.

    • Thanks Kevin. I’ve been blessed with a low bar­ri­er to entry for real estate in this area. And don’t wor­ry — I won’t punch you in the face haha

  7. Awe­some find — and yes, “being a good per­son still helps, even in 2017 — we total­ly agree! We own a unit in an area that has sim­i­lar prop­er­ties at sim­i­lar prices. It’s hard to relate to the prices in oth­er parts of the coun­try! Looks like you did an awe­some job find­ing this house. Look­ing for­ward to fol­low­ing your progress!
    Vicki@MakeSmarterDecisions recent­ly post­ed…We’ve Had The Same Ten­ant for 22 Years and Haven’t Raised the RentMy Profile

    • Thanks Vic­ki! The prices in oth­er parts of the coun­try at just insane. I’ve heard any­thing from $400k to $1 mil­lion comps. I can’t even imag­ine.

  8. Con­grats! I’m glad you found a house that meets your goals. The num­bers sounds great. Make sure to keep a big emer­gency fund, espe­cial­ly with an old house. How is the area? I’m in the Mid­west as well but I’d have to go to some pret­ty seedy areas to find a price like that.
    Fer­vent Finance recent­ly post­ed…Time, the Ulti­mate Com­mod­i­tyMy Profile

    • The area is good. Safe, and on the up and up. I could’ve gone a mile over and got­ten a prop­er­ty like this for $30k but I have no desire to live in the ghet­to.

  9. Oh my GLOB con­grat­u­la­tions!!!!! I’m so hap­py for you Gwen! That’s a gor­geous house, and I can tell you, in my cur­rent neck of the woods (Beau­ti­ful Expen­sive Van­cou­ver, Cana­da) We’d be look­ing at at least 2–3 mil­lion for that, pos­si­bly more depend­ing on the neigh­bour­hood. Sounds like your plans are falling into place and falling into place fast, super excit­ing!

    • Van­cou­ver “kicked out” the Chi­nese investors by mak­ing it more expen­sive for them to buy. Or the bub­ble has got­ten too ridicu­lous­ly high in Van­cou­ver so I think they have moved down to Seat­tle.

      It seems like the bub­ble is mov­ing up and down the coast. Once SF (https://youtu.be/SBjXUBMkkE8) and Van­cou­ver got out of con­trol the bub­ble is expand­ing out to Seat­tle, Port­land, etc…

  10. That’s awe­some! Con­grats!

    I’m look­ing to do some­thing sim­i­lar in the next few years. Find­ing some­thing for less than $100k, $15k down­pay­ment + closing/repairs, and meets the 1% rule is a great goal!

    You men­tioned get­ting the place inspect­ed. Did you do that before sign­ing?

    Also, curi­ous about the total month­ly cost (with PMI?) and your plan (Time­frame) to pay off the mort­gage.

    • Thanks Gary! I have yet to get it inspect­ed or secure financ­ing. Rest assured I will cov­er those details when I get there though!

      Good luck with your jour­ney!

  11. I’m so hap­py for you, Gwen! 🙂 It’s a gor­geous home! And great val­ue too. Win-win.

    I think you prob­a­bly already know this, but this prop­er­ty would be at least 150k where we’re at — prob­a­bly more. I’m seri­ous­ly con­sid­er­ing look­ing in a dif­fer­ent area now…like your area. Espe­cial­ly after see­ing those num­bers!

    Can’t wait to fol­low your jour­ney!

  12. I’m real­ly enjoy­ing your jour­ney here! Will you be show­ing us a num­bers break down for prop­ert tax­es, water/sewer, etc in your next arti­cle. I’m think about start­ing down the same path and you’re an inspi­ra­tion 🙂

  13. Pop the cham­pagne, that’s amaz­ing!!

    I have such a love hate rela­tion­ship with watch­ing Amer­i­can FIRE’s prop­er­ty deals. That sort of place in Aus­tralia would eas­i­ly push up to a mil­lion in cap­i­tal cities and sur­rounds. If you were out in the mid­dle of nowhere (which we have a lot of) you’d still be look­ing 4 times your pur­chase price. I know Paula (Afford Any­thing) says that 1% deals are every­where, but I still haven’t found one in Aus­tralia. Here a 5% annu­al rent return at pur­chase is a good deal 🙁

    But a mil­lion hoorays for you! When­ev­er those but­ter­flies kick up and tell you you’re mov­ing to fast, just remem­ber you’ve been plan­ning this for yonks. When the right place comes up dive on it.

  14. Dang.… nice finds! I’ve been read­ing your prop­er­ty own­er­ship sagas and I’m glad you final­ly found a good spot. It seems insane to me to see those price to rent ratios.

    • Appar­ent­ly they’re not the norm! I’m quick­ly real­iz­ing how for­tu­nate I am to have been placed here.

  15. I’m so excit­ed for you! Con­grat­u­la­tions!!! It’s adorable. What a great find.

    BTW, I dis­cov­ered your blog a week ago when you com­ment­ed on Fru­gal­woods, and have stam­ped­ed through all 13 pages of posts in the past week. Thus, I feel like I know you per­son­al­ly and am excit­ed to keep up with you from now on.

    Lots of weird you’re-a-stranger-but-I-know-your-every–personal-detail-yay-internet love,
    Kaitlin (24, ex-Army Nat’l Guard, mar­ried, in our first year of start­ing to tru­ly make mon­ey and con­sid­er that FIRE life)

    • Thanks for read­ing Kaitlin! I am so hap­py you decid­ed to join in the fun over here!

      PS it’s only weird when we meet in per­son and I go to talk about some­thing that you already know! haha i’ve done that with a few blog­gers myself 🙂

  16. OMG the five cats- dying.

    I so wish you would tell me in what city you live!! I’m dying for more rentals, but there is no way to hit the 1% rule any­where in my state. I’m dying to buy more!

    Con­grats! Good for you!

  17. What services/tools did you use for your house search? I’m hav­ing trou­ble iden­ti­fy­ing invest­ment prop­er­ties in my area (i.e. not sin­gle fam­i­ly).

    • I use realtor.com to look since you can put a mul­ti-fam­i­ly fil­ter on it. When I’m ready to get seri­ous and actu­al­ly get ready to go look at hous­es, then I’ll start using the real­tor search that sends me updates on when prop­er­ties come on the mar­ket.

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