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.

  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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