My current real estate investment project started on June 13, 2014 when my parter Mel and I closed on a great property downtown Kamloops.
The plan was to purchase, renovate, then refinance to withdraw the new equity we created. We then plan to rent the place out to create a nice income.
The coolest thing about this project is that the a portion of the profits will be supporting children in a developing country, creating a fabulous legacy for Mel and his wife.
Here are the steps we took to make phase 1 a success:
A) Due Diligence
D) Marketing and Tenant Screening
E) Collect Rent
A) Due Diligence
My partner and I viewed multiple properties. One of the most interesting was a townhouse in the Brocklehurst area that looked like it was perfect for inserting a basement suite, very unusual for a townhouse.
Another interesting property was fourplex in an area undergoing “gentrification” in the center of the North Shore. A very tough tenant profile, large money needed to fix it up, along with inflated property values for anything resembling a multi family building made this project just outside my parameters for a desirable investment.
After crunching the numbers we decided to place an offer on a detached house downtown with potential for a secondary suite.
We made an offer and had one accepted that I believe was below market value.
I think the seller believed so as well, because they tried hard to make the deal fall through!
I think there was some other buyers lined up because the seller applied huge pressure to close early, restricted our access to the property, and was in general not very nice. This was my first experience with a seller who was so difficult to deal with, I think they had “seller’s remorse” for accepting our offer once they had the opportunity to shop the deal around. Here is photos of what it looked like before we started any work, we closed on June 13th:
Having a deep rolodex of tradesmen you can trust is very important and can make or break a deal. Getting the job done at a fair price and on time is difficult unless you have experience and have built relationships with the trades. Here are a couple photos from June 16, three days after we closed so you can see how quickly we moved:
After we ripped the kitchen out, we decided to make it a bit bigger so we closed off one of the doors to the kitchen. We were surprised to find a window in the middle of the house. This home was built in 1913 and has had two additions, one to the front of the house, and one to the rear. This window that was hidden in the wall used to be above the exterior door.
The result of a 5 hour shopping trip June 18, the cabinets took a long time to pick out:
Here is a couple video from June 18 detailing the demo work done an the beginings of putting everything back together:
D) Marketing and Tenant Screening
I had been marketing the house since before we closed using the listing photos and created a bit of buzz. I had many applicants at my price point and a few showings during the renovation, so I was certain the rent I was asking was attainable.
By July 4 we had the house getting put back together. I was happy in this video because I had a prospect tenant who said he would rent the place for $1850. Here is the video tour.
I was away for much of July for EXCITING PERSONAL REASONS, but when I got back to it, the tenant I had lined up started to display some red flags:
- – he wanted to move in early,
- – all of a sudden did not have all the money for rent and damage deposit(offered $2000 cash saying “you wouldn’t walk away from two grand would you”),
- – his mother was sick and his grandmother just died,
- – he spent all his money moving from Alberta early,
- – he needs to move in right away so he can go back to work,
- – he had to return the moving van right away,
- – he cannot afford to stay in a hotel until the renovation is complete,
- – he wants to move in when the reno is half done,
- – he will have the rest of the money next week when he gets paid, etc….
I told him to put his stuff in storage, and gave him the name of a nice inexpensive motel, and that I would be happy to use my trailer and help him move his things AFTER the full first month rent and damage deposit was paid.
The guy was very persuasive, and it was hard not to feel bad for his story, but by sticking to my system I believe I dodged a bullet.
The deal fell through and I soon had emails demanding the $50 I took to complete a credit check be refunded, and I am sure he has taken some other landlord for a ride.
I don’t believe he was acting in malice, but this prospect’s disorganization and poor money management skills would have spelled problems down the road. Although it was hard to “walk away from two grand” because it meant more work marketing, the systems I have in place(pre written ads that blow away the competition, a website with tons of information where people can apply online, etc) got me new prospects fast.
Here are some July 20th photos my partner Mel took when the reno was not quite done, but he did a great job making it look complete by hiding the incomplete work with creative photo angles and pushing in the appliances(they were not hooked up yet).
I even shot this video for some great prospects who were out of town, you might enjoy the background music 🙂
I set up a showing date for Monday July 28th. I wanted everyone to show up at the same time to create some incentive for my prospects to make a decision. Mel and I scrambled with the last minute unfinished project and runs to Home Depot and I staged the place with a welcome basket to make it feel like home as I always do.
I had a list of over 10 people invited but in the end only my best prospects showed up, they filled out application forms on the spot.
I wish I had a photo of the showings because Mel and I had a great setup. Mel brought a cooler with cold drinks for prospects as they arrived, we sat in the shade at the front of the house under a rare(in Kamloops anyway) mulberry tree, a table and chairs with application forms and a sign in sheet was ready, a professionally made lawn sign was in place, it was a hot day and we had the portable A/C units blasting inside the house so prospects got that feeling of relief when you walk into a cool place from the heat.
It was truly a great showing.
E) Collect Rent
In a couple hours I had approved a group of workers from a nearby newly renovated hotel who loved the place because it was only a 5 minute walk to work. We received $1850 first month rent plus the damage deposit in cash the next day.
Here is a video of the finished product:
So far the project is moving according to plan, I will update you when the basement is completed.
Until next time,