Case Study 4: 126 Main Street

While the first two houses I bought on Main Street were pretty successful from the get-go, this third house was a different experience. Below is some of its financial breakdown at the time we bought it: 

Purchase Price: $115,000

Down Payment: $35,000 (30% of purchase price)

Amount Borrowed: $80,000

Monthly Rent: $825

Monthly Free Cash Flow: $151 (18% of the gross rent) 

Based on the experience of the other two houses on this street, I thought that we would rent this house quickly, but it actually took 3 months before we got it rented. Once we got it rented, the renters stayed for a year. After they left, we decided to remodel the home. I had planned on spending $15,000-20,000 on the remodel, but just last week, we found out that the flooring has asbestos. Now, we will spend about $15,000 to remove the asbestos flooring and then spend another $15,000-20,000 on the remodel. In the end, we will have about $145,000 in this house.

In hindsight, we probably should have performed the remodel before we tried to rent the house. With the other two houses in the neighborhood performing so well, I didn’t think about improving the interior of the third property before we rented it. Once we finish our remodel, the home’s interior will no longer be dated and we’ll raise the rent to $1,000.