MY FIRST REHAB – Kimberly Smith

In my quest to start creating wealth for me and my family, I embarked on an awesome adventure in real estate investing.  I had attended the Donald Trump Expo, gotten advice from various successful investors and I felt that I was ready to go.  I sat down, defined my criteria on paper and started looking for the diamond in the rough.  I wanted a single-family property on a block that was well maintained and somewhat safe so I would spend my weekends driving up and down various blocks looking for my diamond.  I did this routine for approximately two months.  I was patient and in no rush.  Then one day there it was, my diamond, sitting there waiting for me.  It was a REO property that looked like it had been through some hard times, both internally and externally.  I immediately called my realtor friend to get me in the property.  I went in and it was a mess; however, I could see the potential.  The property had four bedrooms, living room, dining room, small kitchen, two bathrooms and unfinished basement.  I called my contracting team and together we determined what needed to be done and how much it would cost.  I went home, worked my numbers and decided to submit my offer of $49,900 which was accepted.  I secured my rehab loan and there it was, I was officially an investor.

My First Rehab Didn’t Go as Planned.

I immediately called my contracting team and they began working two days after my closing.  They completely gutted the house and started putting it back together.  Because I know that kitchens are important, I devised a plan to extend the small kitchen into part of the living room.  We cut a picture window from the kitchen looking into the living room.  I had all the electrical replaced and installed new drywall throughout the house, installed new windows and painted the exterior.  I went to HOBO to get the majority of my material and appliances at minimum costs.  I was adamant about making sure that all the hardware matched, so I had to go to various stores to obtain the hardware.  I’m not a fan of vinyl tile and/or carpet, so I wanted the majority of the flooring to consist of ceramic tile and hardwood floors.  I was able to obtain raw hardwood flooring on sale and a neutral color ceramic tile.  The house had the original oakwood trim in the living and dining rooms, so I had it refinished to compliment the floors.  We added new material and toiletry to both bathrooms and finished the basement to create a decent size recreation room.

For me, the hardest part of the rehab was deciding what to do with the front and back yard.  There was a lot space, partly because there was no garage.  Initially, I had not factored in adding a garage.  However, I ended up deciding that a garage was necessary.  So I had to have a garage installed, which cost me an additional $4000 out of pocket and eliminated my landscaping budget.  As a result, I ended up doing the landscaping work myself, which took me approximately three consecutive weekends to complete.  I added bushes, plants, sod and repaired the damaged concrete around the property.  I admit that it was challenging, but the finished product was pretty nice.

I must admit, not including the landscaping work, the overall rehab process was extremely smooth.  My contracting team was in and out of the property in 45 days and the property was essentially ready to sale.  I listed with my agent friend and we waited.  I had factored in a six-month hold period when I initially did my numbers. I also prepared a contingency plan just in case it took longer than six months to sell the property.  As we were nearing the six month window, I received a call from a potential buyer who was very interested in the property.  However, this buyer was having difficulty securing financing to purchase the property.  I spoke with the buyer several times and decided to consider doing a rent with option to buy agreement.  I contacted my attorney and explained the situation.  He informed me that I should do a thorough background check on the buyer before making any agreements.  I contacted a tenant screening company who facilitated the screening process for me.  The company advised me that the buyer had filed bankruptcy a year ago, but had done an excellent job thus far re-establishing credit.  The company also advised me that the buyer’s current and previous landlords had nothing bad to say about the buyer.  In fact, both expressed their sadness to see the buyer go.  So I called my attorney back and had him draw up the agreement.  I met with the buyer, we agreed on a $5000 non-refundable down payment and signed a two- year rental agreement with an option to purchase at the end of the two-year period.  The tenant-buyer would pay a $1500 monthly rent, with $200 going toward the purchase of the property.  We were twelve months into the agreement when the tenant-buyer notified me that she had been approved for her financing.  She purchased the property approximately one month later.

Although my first project didn’t go exactly as planned, it ended up being a win-win situation for both me and my buyer.  I learned that flexibility and patience are important in real estate investing.  If I had to go back and do it all over again, I don’t believe I would change anything.  That experience was just the beginning of the plans that I have for my real estate investing career.  Did you notice I said “career?” Yes, I’ve decided this is what I want to do.  Now don’t get me wrong, I have not quit my JOB as of yet -   I’m no fool.  My plan is to have a nice cushion in my savings account before I let the job go and I’ve estimated that I can make that happen after 3-4 more projects.  Yet, I’m an investor and proud of it!

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