Wow, has it already been a year? It’s crazy to think about that, and the fact I haven’t done a single update about this deal yet!
It might be a long post, so bear with me. I have a year of problems to detail!
If you didn’t get a chance to see the original post, you can learn everything about my 5 unit deal here.
Everything sort of went according to plan, for about 3 months.
I raised all the rents immediately and no one had any issues and no one moved.
Phase II – Electrical
Shortly after purchase, I started trying to get bids on the electrical project. I expected it to be expensive but I didn’t realize how hard it would be to find a contractor.
While I was bidding the project, I had a burst pipe in the office due to extreme cold. The basement filled up with 3 ft of water, but by some miracle, NOTHING was damaged. Fortunately, the office was actually built as an addition and the basement was deeper there than the rest of the basement, so all the water created a pool but didn’t work it’s way up to the water heaters or whatever else.
Finally, I found one and they quoted me at exactly the price I budgeted for, so I went with them (and I had no other choice since no one else would take the job). But, I didn’t find someone until January and they started in February. Already, 4 months wasted.
Phase III – The Office
March rolled around. Then April. And May…. Then August. The electrical work just kept dragging on. The contractor would disappear then reappear right when I’m about to fire him. He would move forward for a bit, then stall.
It’s hard to explain, but my hands were practically tied because I couldn’t find a replacement. I was STUCK dealing with this guy.
My point is, I didn’t get to Phase III because Phase IV came first.
Phase IV – Rent Bumps Again
Although the electrical was taking forever, I wasn’t going to stop bumping rents. My first turnover came in August when one of the tenants couldn’t afford the rent and moved in with her mother (who also lived in the building). So we bumped the rents up to $850 in the 2 bedroom apartment and also bumped the 4 bedroom apartment up $200 to $850 because now two adults were living there and could easily afford it.
Great thing was – I had the 2BR pre-leased before the work was even complete justifying my estimated rents.
Phase II Again
September rolls around and winter heating season is quickly approaching. Unfortunately, the electrician moved all the electric baseboard (for one unit) from the old panels to the new panels…then promptly failed the inspection. So, now my tenants in that unit have no heat, my electrician disappears again, and as they say:
Winter is coming, Jon Snow.
This is a disaster waiting to happen.
Somehow I pull an electrician out of my pocket and BEG him to do the work. He grudgingly accepts. Within 2 weeks the entire building is wired and ready to go.
Phew, emergency avoided.
Back to Phase IV
Another tenant notified me of their intent to leave, then vacated on October 31st. On November 2nd I got it pre-leased for $850 and hadn’t even cleaned the apartment yet. Here’s a quick video of what it looked like when I got it leased.
Of course, when the tenant moves in, it will look similar to the pictures above.
Could I have got $50 more if I waited until the work was completed and THEN showed it?
The reason I advertised this price and took it is that I would have had another 2-3 weeks of vacancy. Let’s do the math.
11 months 1 week @ $900 = $10,170
12 months @ 850 = $10,200
So, over the course of the first year, our income is basically the same. After 12 months we can bump the rent up to $900+.
Even though the work has taken a lot longer than I expected, I have stayed (mostly) on track with rent bumps. Because of this, I’m still essentially on track to hit my 18-24 refi goal.
The market is hotter than I expected and I’ll likely get rents that a little higher than I expected. Higher rents = higher value.
The property is in worse condition than I expected but I left a good contingency line-item in the budget so I should be able to stay on track.
Had a bad storm that caused some damage to the property. The cost is probably too low to file an insurance claim, so I’ll probably have to eat the few thousand in repairs.
I post updates and pictures about my projects on Instagram. So follow me there! They are too small to write blog posts about, but I love to share them.
What do you think about the project? Comment below.