House #2 Search

The search for my second investment property continues. I’m putting together a cash offer right now on a $24k single family home in central Mass. It’s actually almost exactly like my first house. It isn’t pretty. It’s small with a small yard. It doesn’t have any big problems, but it has about 1,000 little things that need to be done. A new sub-floor in one room that used to be a porch. Ripping up carpets. It has old wooden windows that might be ok for a few more years but really ought to be replaced. There’s some siding work that needs to be finished. The ceiling is some kind of cheap foam tiles that have seen better days. From the low-quality of construction I’m betting it’s barely insulated at all. The cabinetry might be salvageable. The pipes burst in a couple of spots but the house is so small there really isn’t much plumbing to really have to deal with. The bathroom’s generally ok. Furnace and water heater look new-ish. The roof’s solid. The wiring’s modern and fine. It has town services so I don’t have to worry about septic or well issues. Looks like there might be a foundation issue that makes it un-finance-able, but perfectly rent-able.

I expect I could get the whole thing into rent-able condition with about 2-3 months of work and less than $10k. It would rent for somewhere between $950 and $1200/month depending upon how good it ends up looking.

That would put my passive monthly net income at somewhere around $1,400 – $1,600/month, that’s after paying taxes/insurance and includes setting a couple hundred aside each month for future repairs.

Hopefully I’ll be able to get this one. Sometimes it seems like it would be easier to move a mountain than to get a bank to take my money in exchange for the rotting houses they don’t want, so I’m not holding my breath. But if I don’t get this one, another like it will come along within the next few months.


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  1. Chenda
    Posted June 14, 2011 at 1:55 pm | Permalink

    Good luck with it Mike hope you get it, I love to read your updates!

    You seem to be getting a fantastic rental yield on your property, somewhere around 12% even with the highest resale valuation ? Do think this would be sustainable in the long run for financial independence ?

  2. bigato
    Posted June 14, 2011 at 4:03 pm | Permalink

    Good luck, bro. I’ve bought #1 today (very very cheap), where I will live for some time (not good place for renting). And in the same day someone told me about another one that maybe will be the #2 !!!

  3. Posted June 15, 2011 at 12:26 pm | Permalink

    Wow, man, you seem to be getting a good hang of it – I mean with all the estimates of cost, time.
    I hope it works out for you – if not this house, then another one.
    So you are on the market for bank-owned properties? Ever visit tax lien/tax deed sales? (I don’t know what exactly they do in MA)

  4. Posted June 15, 2011 at 3:30 pm | Permalink

    @chenda Thanks! I’m hoping I can scoop up 2 or 3 more single family homes in this price range in the next year or so before prices start going back up. Once I have 2 rentals plus a place to live in I’ll be pretty well financially independent. I’m planning on going until I’ve got 3 rentals though, plus a place to live in. That’ll allow me to save significant money each month to put into stocks and eventually get out of the land-lording business when I’m around 40.

    @bigato hey buddy, I sent you an email. Congrats on the place!

    @dmitry Hey! I am getting the hang of this… ;-)

    I’ve been to some auctions and placed some bids but haven’t had any luck.

    I haven’t been to any tax auctions. And I’ve only ever come across one real estate tax auction advertised and it was for a big piece of commercial property.

  5. tuixiuren
    Posted June 20, 2011 at 7:09 am | Permalink

    Hey Mike, Congratulations. Good luck with the properties. Everything you are doing is really inspiring. What type of insurance do you have for the first house?