Archive for the ‘rehab’ Category

Our First Rental House Plunge

Wednesday, May 22nd, 2013

By Terry & Angy Sprouse

 

We (Terry & Angy) are partners in both marriage and in real estate business.

Who says married couples can’t be business partners? And the great thing is we have never considered divorce . . . murder sometimes, but never divorce. Well, never murder, really, but maybe forcing each other to watch, in an uninterrupted viewing, the horrifyingly bad movie, The Clan of the Cave Bear.

In reality, this business has been a bonding experience, not only for us, as husband and wife, but also for our two boys, who have been active participants in the business from the very beginning.

9/11 Attacks Take the Starch Out of Us

We started in real estate investing following the terrorist attacks on the World Trade Center. The ensuing economic recession forced our hand. The hours at Terry’s job were drastically reduced. We realized that for the security of our family, we needed to have a business on the side—a business able to provide regular cash flow in case Terry’s 9 to 5 job suddenly went away.

This led Terry to experience a very intensive period of soul searching and in-depth research (accompanied by gratuitous whining and moping). We decided that a rental house business was the best way to go. We were excited to find the rental business was an easy business to learn and to start. This business required no special license, degree, or training. And the results tempered the most important source of Terry’s whining. The rental business offered the potential to make money.

We Jump In and Hope the Net Appears

We essentially just jumped in with good intentions and very little practical knowledge. After we made up our minds that this is what we wanted to do, we simply bought an inexpensive fixer-upper house, one that had foreclosed and been repossessed by a bank. We moved into and lived in the fixer-upper house while we did the necessary repairs.

But most importantly, we did not sell our original home. We rented it out.

Angy Puts Her Foot Down – On Top of Terry’s Foot

It took a little adjustment to move into that first fixer-upper house. The first thing we did was to get one of the bathrooms back into working condition. Angy’s negotiating stance on that topic was, “I’m not living in that house unless at least one bathroom is fully operational!” At that, who could argue? Marveled by a mother’s logic, together Terry and the boys nodded their heads and dropped the labeled empty plastic bottles they held in their hand into the Recycle Box.

As we went forward with the repairs, we changed bedrooms frequently. Moving from room to room, we cleared out of one bedroom to install tile and then moved again out of the next to make room to install carpet. Huffing and puffing, we moved furniture from one side to the next as we worked through the house painting all the walls. We replaced the cabinets in the kitchen, the fixtures in the bath, the leaky plumbing and the outdated lighting.

Group Hugs

Preparing meals required serious creativity. Entertainment and rest required the same. But the support and flexibility from all family members, and a few timely “group hugs” (some through gritted teeth), got us through.

 

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Recommended reading:

Remove that Garbarge Disposal Now!

6 Steps to Roof Maintenance (for the Home that will Turn Into a Rental House)

How I Evicted A Problem Tenant in 4 Steps

When to Hire a House Inspector – Radio Interview with Rich Peterson

Getting Rid of Bad Tenants

“Turn your home into a rental” on Mark Wayne Show

7 Reasons to Live in a Fixer-Upper House While You Repair It

6 Steps to Roof Maintenance (for the Home that will Turn Into a Rental House)

Our First Rental House Plunge

10 Most Frequent Problems Found by House Inspectors

5 Steps to Get Your House Ready to Rent by Terry Sprouse

5 Steps to take if your house is flooded

Some perfectly legal ways to maximize your rental profits

Add “Start a Rental House Business” to Your Bucket List

The 5 Rules on How to Lose Money and Get Your Rental Property Trashed by Tenants

Window Repair with #2 Son

Required Roof Maintenance for Fixer Upper Houses

Learn to Repair Your Fixer Upper Houses

How I Got Started In Fixer-Upper Houses

How to learn to operate a fixer upper house business

The Peaceful Warrior and Fixer-Upper Houses

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Efficient Design – Green adds Green

Tuesday, January 17th, 2012

This is a guest post by: Erik Braunitzer of Douglas Elliman Real Estate Company, agents for NYC Apartments.

The bathroom is an essential part of most every home. However, the bathroom is also an area that is often neglected when it comes to creating an environmentally friendly and green space. Luckily, when designing or remodeling your home, the nation-wide renewed focus on green living has opened up an entire marketplace full of green items.

And what most homeowners and contractors don’t realize is that going green really boosts the value of your home. Things like geothermal heat, 95% efficient furnaces and walls made with reclaimed materials are just a few examples of expensive but worthwhile home investments. One of my favorite areas of focus is the bathroom.

Recycled Glass Tile: Tile is a commonly used throughout the bathroom, from floors and shower walls to backsplashes and accent work. Consider using recycled glass tiles, which come in a wide range of colors, shapes and sizes. Recycled glass tile is installed in the same manner as regular tile, and can come in pre-spaced squares allowing for easy installation and grouting.

Sustainable Harvested Woods: Wood is often used for vanities and even flooring for bathroom spaces. However, many wood products require the use of environmentally unfriendly or even illegal logging practices to supply the material. Choose products with a Forest Stewardship Council approved sticker on them, or choose more environmentally friendly products like bamboo, cork or wheat straw. Storm-feld tree products are also an option for a greener bathroom. Avoid wood products made from particle board, which often contains formaldehyde.

Recycled Metals: Recycled metals can be used in your bathroom from cabinet pulls to fixtures. Look for products such as recycled metal counter tops, vessel sinks made from recycled metal, recycled aluminum tiles, salvaged brass faucets, and recycled bronze metal hardware.

Composite Terrazzo: Another way to use recycled materials for vanity countertops is through composite terrazzo products. These counter tops are made from a wide range of different materials, such as recycled glass, which is then combined with an epoxy binder or cement to create the hard and formed surface of the countertop. Because there are different types and colors of materials used in each piece, you get a unique finished look to the product you install.

Salvaged Products: Whenever possible, try to use recycled salvaged products in your bathroom remodel. Often times home owners will get rid of light fixtures, cabinets or sinks that are still in style, but that do not fit their own current personal style. Purchasing these products from salvage stores reduces the chances that the product will find its way into a landfill, as well as can provide a unique or vintage look to your bathroom space.

Windows: Install windows in your bathroom to bring in natural light. The more natural light you have flowing into your bathroom, the more open it will feel and the less electricity you will need to use, which reduces your energy waste and brings down your electric bills. Install Energy Star rated windows to help reduce the loss of heat or cold air during the winter or summer months.

Toilet: Toilets make up a significant portion of water usage in most households. Each flush can waste gallons of water, even though newer toilet designs can provide the same performance with less water. Look for toilets made to the HET Standard (or High Efficiency Toilet) which guarantees you’ll be using less water with each flush.

While these steps may seem small, every choice helps create a better world for you, your family and generations to come. By making these simple choices, you can make a positive impact on the environment, all without sacrificing style or function in your bathroom.

 Related Posts

Remove that Garbarge Disposal Now!

Fix em up Rent em Out

Conducting Formal Due Diligence

Wednesday, January 30th, 2008

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I am currently reading “Real Estate Investing for Dummies” by Tyson and Griswold, a well-written and thorough book that covers the basics of what real estate investors should know. I’ve long considered “Investing in Real Estate” by McLean and Eldred as one of the best introductory texts for real estate investing. Yet after reading the “Dummies” book, I find it equally as good, and perhaps a little more accessable for the new investor.

Here is my list of Top New Real Estate Books that I posted on Amazon.

To assist those who invest in fixer upper houses, I’m incorporating key parts of the “Due Diligence” chapter from the “Dummies” book with my own real estate observations.

Once you have made an offer on a house and it had been accepted by the seller, the “due diligence” period begins and you have until the close of escrow (or completion of the sale) to check out the physical and financial condition of the property. If you discover that the property has problems, but you think the deal is still worth pursuing, the seller may be willing to correct any deficiences, or give you money to to complete the necessary work yourself.

It’s during this time frame that you must get all of your questions answered and be sure you know what you are getting. If done properly, it will require quite a bit of effort on your part. But it must be done, if you wait until after the property is in your possession, its too late to ask the seller to replace that broken furnace.

You should work closely with the seller but take his word for anything. Only trust what you have in writing.

In my case, most of the house that I buy aren’t bought from the owner. They have been reposessed by a bank, the Veteran Administration or HUD. But I still do due diligence by having my friend/handyman go through house with a fine tooth comb. He knows more about the house repair than anyone I know.

There are two key components of due diligence process:

1. review of books and records
2. the physical inspection

A thorough look at these two components should allow you to determine if the property is worthwhile, priced right, and your goals. The due diligence is your last opportunity to either complete the transaction, or cancel the escrow, have your money returned, and look for another property.

Next post: Reviewing Books and Records

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Roundup of Favorite Blog Posts from the Past Week

Sunday, January 20th, 2008

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Below are the blog posts from the last week that I found most edifying and enjoyable.

Terry Sprouse’s book: Fix ‘em Up, Rent ‘em Out at Conniebrz.com (What can I say? I liked it.)
An easy way to reduce vacancies and rental property turnovers at twowiseacres
Landlord Profitability: Distance + Knowledge = Time and Money at Landlord Business Insider
Buy Now or Pay Later? by FSBO Jane
Down She Goes at Rentals R Us
Rehab Pros: DIY or Hire it Out? at BiggerPockets
Live and Learn at My REI
10 Ways to Completely Ruin Your Credit at Moolanomy
Don’t save it all up for retirement by ChristianPF
Money talk at the barber shop by getrichslowly

Info on Terry’s Book

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Serial Home Buyer/Seller Tax Exemption, Part 5 – sources of fix-up houses

Tuesday, January 15th, 2008

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Sources of Fix-up Houses

For serial home buyers/sellers who utilize the federal tax exemption to pay no capital gains tax, a key to making the process work is to find lower-priced houses in need of repair.

There are good deals to be had even though we just operate on a part-time basis. The pros – the full-time investors – will get eye-popping deals, but there are still enough good left-over deals for us small time operators to get a share of the pie also. It’s like a yard sale. The people who get the huge bargains will be up before dawn, knocking on doors before the yard sales are scheduled to start.

Nevertheless, there are still some bargains left when the rest of us show up a little later in the morning. For my wife and I, finding good fix-up deals primarily involves reading the newspaper, checking the internet, and driving through neighborhoods.

A good source of fix-up houses are those repossessed by banks. These are houses where the owner cannot make the payments on his bank loan and is forced to leave the house when the bank takes it from them. Often the former owner will express his bad feelings toward the bank by destroying fixtures, doors, walls and other parts of the house. While this may give the house an unlivable appearance, most of the damage is fairly easy to repair. This is just the type of house the aspiring handyman investor is looking for, as it has built-in equity because the damage is only superficial.

A second source of good fix-up properties is from the Veteran’s Administration (VA) and Housing and Urban Development (HUD). These properties have had owners who cannot make payments on their loans from these respective organizations, and the VA and HUD have repossessed the houses and put them back on the market. VA and HUD houses are usually offered at a fairly good price, below market if they need serious fix up work done. As in bank repos, the owners have either let their houses run down and are generally in need of, at minimum a paint job, and sometimes a more major fix-up.

My Example

I purchased a VA home, in 2003, in a nice neighborhood that scared off many other investors because there had been water damage to the ceiling in both bathrooms. Upon close examination, I traced the damage to some cracks in the water cooler on the roof. Was it worth it to pay $105,000 for a house in a neighborhood where similar houses sold for $150,000 (and now sell for $200,000)? You bet it was. I could replace the cooler and repair the ceiling for $2,000 to $3,000. The remaining $45,000of equity went to the only person who took the time to climb up on the roof and thoroughly examine the cooler with a flashlight. That was me. HUD, VA and repossessed houses from other federal agencies can be found at the HUD/VA website.

To find bank repos and other fix-up houses, my wife and I carefully scan the newspaper classified ads every day and we spend weekends driving around areas where we might like to buy. We bought our first bank repo by responding to an ad in the newspaper. Based on the ad, it appeared to match all of our requirements, a fix-up house priced at below-market in a nice neighborhood. I visited the property with my handyman friend, made an offer and purchased the property.

To purchase VA and HUD repos, you can also pick up printed listing from real estate agents, some of whom specialize in such sales. Recently repossessed homes are generally listed every two weeks.

Serial Home Sellers, Part 6: Examples

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Grout in Old Houses — Don’t let it get grout of control!

Friday, December 21st, 2007

A common problem encountered in older houses is the grout can look dirty. For the 1957 fixer upper house that my wife and I are presently working on, the tile grout in the master bathroom was dingy (see picture above). My plan since I bought the house was to remove the old grout and replace it with new grout.

However, last week before beginning the grout removal, I checked my copy of Home Depot’s book “Tiling 1-2-3“. The book suggested cleaning the grout to bring it back to its old glory.

So I purchased some Agua Mix Grout Deep Clean, and some White Tile Grout Coating for good measure.

First, I used my grout saw to lightly scrape off dark spots in the grout.

Then, I used the Grout Deep Clean, which to my surprise, actually did make the grout look cleaner. I let the liquid “dwell” on the grout for 5 minutes, I “agitated” it with a scrub brush, then I waited 2 hours for it to dry. But it still wasn’t as bright as I would have liked.

Next, I liberally applied the Tile Grout Coating to the grout.

The coating did a remarkably good job of coloring the grout to a strong color of white. I was very happy with the results. After the coating dried I applied grout sealer.

After all was done, the grout looked like this.

So, the lesson is, as long as the grout is not badly cracked, you’re better off cleaning and coating the old grout. It can save you a lot of time.

Info on Terry’s Book

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Maximize Rental House Profits — Buy Ahead of Time and Install Yourself

Saturday, September 22nd, 2007

When operating a fixer-upper rental house business we must constantly be on the look out for short cuts to reduce our costs.

For example, a good way to buy a home furnace is to keep your eyes open for good-looking used one at yard sales. I came across one for $30 at a yard sale. There were actually two for sale, and I bought the newer, better-looking one. I offered $25 dollars, and when the lady wouldn’t take it I drove off thinking she was too inflexible. But, as I drove away, I came my senses as I asked myself, “where else am I going to get a good-looking furnace for $30?” I immediately turned my truck around and bought the furnace.

I knew I would need one soon for one of my rental houses. Looking back, I probably should have bought them both and kept one for the next time I needed one.

A friend of mine and I installed the furnace ourselves. Its a pretty simple matter to hook up the gas pipe and thermostat wiring. The major cost was about $40 for a guy to make a tin hood that connected the furnace to the duct work in the ceiling. Other parts, connectors, screws, etc., were about $30-40. I had a professional check out the work when we finished and viola! I had a working furnace for a fraction of what it could have cost though normal channels.

Of course, in buying used, you always take the chance of getting a furnace that doesn’t work But, in my experience, it’s worth taking a chance, and many times you hit the jackpot and can save hundreds, if not thousands, of dollars. Keep your eyes open at those yard sales!

The lessons are, in order to maximize profits with your rental properties, to buy things as cheaply as possible, and to install them yourself. You can save a lot of money by buying ahead of time, when things are on sale. Don’t wait until the day the furnace breaks or the toilet kicks the bucket. You can usually see signs of these things sputtering before they finally go out. Take advantage of that knowledge to make a preemptive strike, and to purchase ahead.

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