My Very First Rehab
Looking back to when I started in real estate it seems like a lifetime ago. After 10 years in the business, I almost hate to remember how much of a “wet behind the ears greenhorn” I was. I believe I wore out three separate Realtors trying to buy houses in the hottest market in decades.
I had my little formula, a $1,500 earnest deposit, and my “pre-approval” to prove that I could close the deal. I walked through over 150 houses before I ever got one under contract. I remember watching another investor pay substantially more than what I thought he should pay, and I wondered, how will he be able to make money? I found out how, three years later he lost all five of his properties.
I finally landed on an agent who understood what I was trying to accomplish. The first house that we made an offer on through her she got under contract. We did have to negotiate back-and-forth but that’s part of the process.
I remember buying in a very conservative manner, thinking that the home was only going to be worth about $135,000, and I would need about $30,000 for the fix-up. So, I had to buy it at $65,000 that was my maximum allowable offer and it might’ve been more like $69,000, but I put the house under contract at $65,000. And then, I had $30,000 worth of fix up to do. I started working on that house by myself, and then with some friends and family and really OVER-refinished it. New roof, new interior paint, all new interior doors. In the kitchen, I put in high-end kitchen cabinetry, heated floors under the kitchen tile and in all of the bathrooms as well. New siding, all new windows and I even put in a gas fireplace. I had some leftover stone from a landscape project that I split and made a beautiful, real stone gas fireplace.
After everything was completed, I ended up needing another $15,000 to finish it, because I made it too nice! I completed the rehab with landscaping, since it’s all about curb appeal at this point. The best part was that instead of it being worth $135,000 — it was now worth more in the $165,000 to $180,000 range.
While working on my first rehab, my agent continued to make offers for me on new properties, which I didn’t mind because we were offering so low, that it didn’t matter. She ended up getting my second house under contract before I was done with the first rehab. I couldn’t believe it, but that’s why I hired her. So, she called me one evening, I think it was around December, a couple months after I started the first project and she told me she had good news and bad news. I said, “Well, what’s the bad news?” She said, “I got the 2nd house under contract for you.” I said, “What’s the good news?” She repeated, “I got the 2nd house under contract for you!” I remember hanging up the phone and looking at my wife and saying, “I just bought another house and I don’t know what I’m going to do with it.” The second house we bought was worth somewhere between $235,000 and $250,000 and I got it for $118,000. In the long run, I did end up selling that one for $250,000. Making my first two rehabs very profitable deals.
We bought several houses after those first two and that pace persisted for several years. I remember being freaked out for quite a while, including having a recurring dream as I was growing the business. It was a dream/nightmare where I had investors calling me about a house I had bought in my dream. I would be
driving around La Crosse trying to find this house that was supposed to be worked on six months ago, and I didn’t know where it was. Then I would wake up and count the houses that I owned to remember if I had actually forgotten about a house.
Later on, I learned that to be successful and to achieve things that I never thought possible, I need to work from the perspective of being a little freaked out all the time. It’s stressful, but I’ve found that when I put the stress away, I’m not near as happy as when I have the stress! But maybe that’s just part of my personality!
By the time I started buying beyond that second house, I physically couldn’t work on homes anymore. So that’s when I started hiring contractors. Especially now since we have rehabs, new builds, and several projects going on simultaneously.
But, you can never do your second house until you do your first one.