First Rehab

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In the spring of 2005, my wife and I were discussing our future. We're both in our mid-20s and have three young children, so we were looking for a way to live a comfortable life and to be able to spend plenty of time with our kids. I work at night at a newspaper and my wife is a stay-at-home mom. We looked into several options and settled on real estate investing. We bought a stack of books to read and scoured the Internet for as much information as possible. We finally decided rehabs were the part of REI that interested us the most. In September 2005 we found a property that we had a strong gut feeling about. We ran the numbers and decided to dive in. We bought a 3 bedroom, 2 bath, 1300 square foot house in a nice neighborhood for $71,500. It was a foreclosure that hadn't been lived in for a year. The outside was nice — vinyl siding and roof were only about seven years old. Inside was a wreck. The house had been overrun by dogs. Our realtor wouldn't even go inside the smell was so bad. Because we're light on cash we decided to do the work ourselves. Our mortgage broker had promised us a construction loan at closing, but wasn't able to come through on her promise. So, we spent our first couple of weeks of ownership looking for rehab money that we thought we already had line up. Finally, we borrowed $10,000 for the rehab from our parents and got started. I have no construction experience and haven't even done much home improvement on my own residence, so there was a lot of learning as I went. Once we got the systems turned on (the bank hadn't allowed any inspection clauses, so it hadn't been inspected yet) we found that though signs around the house said the house had been winterized, it hadn't been done well and there were several frozen/busted. So we had to get a plumber to come in and take care of that mess. Every wall was patched and painted, new carpeting was installed in the three bedrooms upstairs (this was one thing we had done professionally), the hallway and stairs leading up, bathroom floors were tiled, bathroom and kitchen counters were tiled, laminate flooring was installed throughout downstairs, new doors inside and out, lighting fixtures� the place got the works inside. We also redid the deck out back which was previously built to surround an above-ground pool. Since we had no pool and no intention of adding one (who needs that liability?) We simply fashioned it into an attractive two-tier deck. With it being our first rehab things took a little longer than expected, but we learned a lot along the way. We finally completed sale of the home at the beginning of May 2006 for $127,500. After buying, holding and selling costs, we netted a tidy profit of just over $25,000. That's plenty of motivation to hurry up and find another house to start on.

Ryan Ballard
Dunmore, PA

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