I bought a house for $2500 a few years back at the tail end of the real estate downturn. I was surprised (as I’m sure you are!) when I found it available. I bought it directly through the county office, as the previous owner did not pay their taxes. When you buy a property like this, you don’t know what you are really buying until you own it as you can’t go inside. When I bought it, I was wondering if I made the right decision.
Who was living in it?
There were people living in the home. It turns out, it was the previous home owners who didn’t pay their taxes. They were living in the house for free – not paying their mortgage nor taxes. I do have a kind heart and didn’t want to just evict them, so I tried working with them (against the wise advice of others). They had a choice to either rent it or to purchase it back. Ultimately, they did not do either, so they moved out shortly afterwards. Note to self: I really should have listed to the wise advice!
Next, get the house ready to rent.
So what do you get for $2,500? It is a 3 bedroom, 2 bath house with good bones. There was mainly just cosmetic work needed (painting, new carpet,vinyl floors, refinish hardwood floors) and there were some plumbing issues that were fixed during the process. Below are a few pictures after the work.
Here is a picture of the kitchen after painting and putting in a new vinyl floor:
Here is the dining room after painting the walls and refinishing the hardwood floors:
Here is the living room, the tile on the fireplace had been painted over:
Here are a few pictures of the bathrooms:
When you get involved in a project like this, especially sight unseen, you need a good team. I had a good team with a very talented contractor, good help from family, a real estate attorney to assist with the title, and the property management company.
The house is currently rented out. I have debated selling it as the market has improved, however, there are great tenants living in the property who have me leaning towards keeping it for the time being. After hearing other people having bad experiences with tenants and having some bad experience myself, I want to do everything I can to keep the good tenants in the house. For me it is worth not significantly increasing rent to keep good tenants – the cost of a vacancy and repairs is more than worth it to me.
Thoughts on having a rental property:
- Constant monthly income
- Asset appreciates over time.
- Own a tangible asset (i.e. a home)
- Not a passive investment. Having a good property management company has been very helpful to deal with issues, however, there are still times when I have to get involved.
- Net inflow is not what I thought it would be. The taxes, insurance, fees, and maintenance items each get a share of the rent. I am glad I was able to get the property for a low price and pay cash…it would be a struggle to have bought the house for market value with a loan and have a positive inflow. As I stated above, I could raise the rent some, but I would rather have the good tenants than turn over and repair work needed.
So a question to other landlords…what is the deciding factor if you keep or sell a rental home?