Toto House # 4 Buy, Rehab and Rent Details

Remember how rough Toto was when we got him? There was an actual shitter in the front yard and Christmas lights in August. 🚽 😂

The inside wasn’t any better..drop ceiling, wood paneling, mismatched flooring, mysterious dead something smell, and lots of stuff left behind by our inherited tenants.

We initially planned to just paint over the panels and replace the drop ceiling, paint cabinets, and replace flooring. But once we got in there, we ended up deciding to go all in and although my budget wasn’t happy with me, I am SO glad we made this choice. We found beautiful high ceilings and a new open floor plan, along with a kitchen that is completely unrecognizable! I am also grateful that I was able to leverage and strengthen my network of local women investhers and the majority of start to finish work and supplies came from all women. WOMEN CAN and ARE killing it in a male dominated space, which makes me want to keep sharing with the next generation of women. 💃🏻

Just look at this beauty we created. 👀 Improvements made include adding a laundry room, closets in all bedrooms, fresh paint in/out, all new windows, new ceiling, new kitchen cabinets/countertops and added a dishwasher, opened up the living/dining area, new bathroom vanity/mirror/accessories and new flooring throughout. We also cleaned all vents, demoed an old shed, added a new retaining wall/crawl space cover in back to protect the foundation, and repaired the roof.

Now..onto the numbers!

Purchase Price: $38,000 (negotiated down from $50,000 because I could close in 3 days)

Rehab Costs: $28,000 (only $18k over my original budget)😅

Other Misc. Holding & Closing Costs: $6,000

All in: $72,000 (we used a combo of our own savings and HELOC to fund the purchase and rehab)

We had multiple applications and Toto was rented in one day for $975 a month. When we first started, we were planning on around $800-$850 a month so we are definitely excited our property manager suggested $175 higher and we got it.

After Repair Value: TBD in late Jan when we hit our 6 month ownership mark and do a cash out refi. Based on comps, looking for something around $100,000 give or take.

While we are waiting to pull our money out and reuse for the next one, we are making some improvements to our first rental (more to come on this) and eyes peeled for that next opportunity. Let me know if you have it or if you have any questions.😉

The Pros & Cons of DIY

If you’ve been following along on Instagram, then you will notice that we have made the choice to do a lot of stuff on our own recently. I have been reflecting on this and thought it was worth a post of the good and the bad that we’ve experienced. Hopefully this will help you if you are taking on a new project at home or with an investment property and are trying to decide if you want to hire it out or do it on your own. Let’s start with the pros..

The biggest plus to me is that DIY is a whole mindset. There are so many descriptive words that I feel when planning or doing a new project, like empowered, inspired, creative, confident, etc. that carry over into the rest of my life. It’s hard to explain in words..it’s more of a feeling it creates and a perception of what you are capable of, which is so much more than we all think! So it’s not about the project as much as it is about the growth you experience going through a project of any size.

Another big plus for us working as a couple has been the bonding (in between the yelling and crying of course) and any good project has a little bit of both. 😜 My favorite was the teenager mixing paint at Home Depot who didn’t realize her question about what paint type we wanted would be a trigger. Or the time I got overwhelmed in the electrical aisle but had to shout out “Aisle 20 bay 9” through tears because we had a short amount of time to get supplies, so I persevered through that middle of the aisle breakdown and got the job done. But once you get past those heated moments, it gives us something that is ours and will always be and it has made us stronger as a couple and as parents. We are building a life together for now and the future to enjoy. How freakin awesome is that?!

One more huge benefit is quality control…or just control in general. This can be a double edged sword though, as sometimes you have to allow control over to others or delegate items out that are above your expertise or you don’t have time for. But nobody is going to love your project like you do, so that will shine through in your work. You also get control over the details, timeline, etc.

Of course money is the last major pro that is the most obvious. BUT..please keep in mind that much like quality control, this is another area that it might be worth the money you spend vs your time being spent. Also, sometimes you may not have as much background in something, and because of that, you may end up spending more time/money doing it DIY than it would have been subbing it out.

So now let’s switch to cons. I already covered the control piece and how that can be a con. It can quickly become overwhelming, especially if you are new, to run an entire rehab project and manage any subcontractors and supplies along with all the other things that go with a property. Another con is the amount of time. Sometimes, especially if you have other stuff on your plate, you may think you’re saving money by DIY’ing, but maybe your project ends up taking 4 months instead of 4 weeks. That time is costing you money. Another con is that you can get hurt..literally. Some projects carry risks and it’s not uncommon to get that “blood, sweat, and tears” all in a days work. One of the biggest cons is just the amount of time it took away from our weekends and a few evenings. It’s something that is ok for a short span, but not sustainable to repeat with our other priorities like kids and their weekend sports, running the household and preparing for the next week of work and school.

Overall..I don’t think there’s a right or wrong on whether you DIY or hire out, but I would say to start small and start with what you know. For example, if you’re on your very first project, maybe not do a full gut rehab and just stick to a project that needs paint and upgrading the backsplash in kitchen and changing out the mirror, light and vanity in the bathroom. Then you can decide from there if you want or are ready to take on a bigger project. Also, you may start doing one way, pivot to another, or do a combo of both on each project. I find us usually doing a few things that we can and subbing out the rest, but the next few I may stay more hands off.

Do you prefer to DIY or to hire out?

House #4 Purchase Details

Have you ever bought a house in a pandemic? This was actually our 3rd closing since Corona hit, so we know the drill pretty well. My favorite was the refi on our personal house that we did in our driveway, wearing masks and gloves on a garage sale table…because..who’s going to let a little pandemic stop them from reaching their financial goals?! Not the Templeton’s!! Shoot..I even put on my fancy muscle tank and best jean shorts to mark the occasion.

But..I am here to tell you all the numbers, since that is one of my favorite parts of these house posts. (Mainly because I’m super nosey and want to know all the details of other people’s purchases, so happy to share when I buy one)

Here they are:

We bought The Toto House off a wholesaler who was asking $50k and had another offer for $40k. I told him I was all in at $38k and could close within a few days. He accepted our offer, even though it was lower, because the other guy was flaky and he liked that I would close fast. We paid $40,141 total and had the shortest and least amount of paperwork in the history of time. So short that I almost forgot I was buying a house and my husband had to remind me we needed to ask for the keys. 😅 This experience of negotiating with all cash and an easy fast close makes me want to do all cash from this moment on!!

Our goal was to use our HELOC on our personal home, but our bank is not into fast and easy closings..lol. It’s a month in and we still don’t know when or how much we are approved for, so this was bought with our savings and part from a private loan.

We are estimating about $10,000 in rehab costs, another $2,500 in closing costs for the refi, and low comps in the area are right around $75,000. If we appraise at the lowest expected amount of $75,000, then 75% LTV would be $56,250. When we stay on budget, we will be all in at $52,641. So we should be able to pull all of our money out and also make about $3,500. If we underbid the rehab, then that $3,500 also gives us some flexibility within our budget or on the appraisal, both learnings from my last project. (We did also already account for 10% contingency)

Excited to get started on this as our first DIY renovation. (will sub out floors but plan to do a lot of the rest on our own) Of course this is just the B in BRRRR and I will share any and all details along the way. Let me know what questions you have!!

BRRRR it’s getting cold in here 🥶

I know I know..I’m sure everyone is thinking there must be some Toros in the atmosphere comes next?! Or maybe I’m the only old ass nerd still out here quoting Bring It On, which by the way, happens to be a classic cheerleading movie. 📣 🎥

Ok focus..it IS super cold and snowing hard here in Kansas City today, so it’s perfectly timed to talk about BRRRR, which is why we are all here (not from the cheerleaders movie or cold weather, but the real estate investing version). The strategy has been around for a minute, but the guys from BiggerPockets hold the clever naming rights I believe.

I am SO SO SO PUMPED UP to be getting after our very first house using the BRRRR method. So I wanted to explain this strategy very high level, and how it can be a great way for investors to grow a portfolio of buy and hold properties quickly, and with little of their own money tied up in the deal long term. Clearly I’m a newbie and can only speak to what I’ve researched/read/listened to, and what real life has brought my way so far, but thought I could at least introduce the concept to other newbies.

The premise is a way to use little of your own money while growing a buy and hold portfolio. In its simplest form, it stands for buy, rehab, rent, refinance, then repeat. We are still in the “buy” phase of ours, set to close this week, and excited to move into the rehab piece and plan to share the full details once we wrap up this project. We are going to just use some rough numbers here as an example.

Let’s say you find a distressed house or a homeowner who needs to get out fast of their current home. There’s lots of ways to find these deals, which I’m not going to cover in this post, but will save for another day. The distressed home or owner is an opportunity for you to help solve their problem and to buy their house from them. You would aim to acquire low, due to current condition of the home, taking into consideration all of the repair costs, and your ability to close fast. You would also need to make sure all of the numbers truly work for a BRRRR. But let’s say you can get this house for $30k and it needs an additional $30k in renovations. You use your own money, private money or hard money for the initial purchase and rehab (also lots of funding options I will also save for another post).

You know from looking at comps in the area (not houses for sale, but comparable houses that have already sold recently) that the ARV, or “after repair value” is around $100k. You have also checked average rents in the area, and know it will rent for $1,000 a month. So, after you rehab it and rent it out, then you go to a traditional bank for a cash out refinance on the property at $75k, and you pay yourself or your private money lender back and you now have none of your own money tied up in the deal and have acquired an asset with 25% instant equity. You have a tenant placed and are now cashflowing a few hundred bucks a month after your mortgage/expenses. You also walk away with a $7,500-10,000 profit (after closing/holding costs).

You keep repeating this process until you get to your buy and hold end game number, whatever that is for you. Work until the cashflow covers your monthly expenses to live, then you can sit back and enjoy your time freedom from your rental portfolio, or you never quit…completely up to you. 🤷‍♀️

I know I’ve simplified the process, but that was my intent. There are a TON of resources out there, including lots of investors using this strategy and sharing their successes/learnings, lots of podcasts, and even some books, so go do your research and dive deeper to fully understand. I would also love to hear input from others out there who are ice cold BRRRR experts. I just love this strategy and I hope sharing from my real estate investing toolkit will help you either get interested in getting into real estate, or help you to strengthen your current investing game.

Haircuts At Home

Well..against several people’s wishes 🤣 I went for it and cut a little over an inch off using the Unicorn method. 💇🏼 🦄

BEFORE:

My thoughts 💭 ummm..I wish I would have tried this sooner!! I haven’t looked at the back, but my husband said it was straight, and he has to be seen with me, so pretty sure I can trust him. I feel very accomplished trying something that terrified myself and many others for me to try. It was actually so super easy, only took about 5 minutes, and was absolutely FREE. (my husband had scissors so I didn’t have to buy anything) ✂️

AFTER:

Just kidding 🤣..

THE REAL AFTER:

My family may be a little scared of me venturing out to their heads next, but going to try and earn their trust through “gentle” persuasion and possibly bribery . 💁‍♀️

With a family of four averaging $25 per cut, that adds up to around $900 a year and $15k over an 18 year period. This doesn’t include color, which I already stopped all together 9 months ago, or eyebrow maintenance, which I’m still trying to navigate on my own, literally one tweeze at a time (had a bad home wax incident of 2013 I’m still recovering from). 😬

The verdict: Go get you some nice shears, watch a few YouTube tutorials, put on a brave face, and go for it! If it goes well, send me a shout out. If it doesn’t go well, take comfort in knowing it will grow back soon. 🤷‍♀️

What can you do with that $15k I just saved your family? Feel free to Venmo it to me. 🤑

What else do you do at home or what should I try next on my new DIY kick?!

(Disclaimer: I am not a cosmetologist and your results may vary, so you have been warned that it’s all on you whatever actions you decide to take after reading this)