Mike: Hey guys, welcome to the show. This is a quick episode on a rental case study we did: How to Rehab a Rental: 2009 Wismer. So Dave and I were out in the field and we thought this would be a good one. This is one our kind of home run rentals we put together. Again, this one is going to be much better if you take the time to go and watch the video instead of just listening to this one. We would encourage you guys to check out our website; DiscountPropertyInvestorPodcast.com, and watch the video on there. Or you can find us on Youtube at Discount Property Investor on Youtube. Again, we encourage you guys to watch this video, you are going to get a lot more out of it. You will be able to see the before and after pictures which we think turned out really well.

David: This is a property here in St Louis Missouri. We picked this property up as a rental property. We paid $37,900 for the property. The ARV of this property is roughly $80,000. We got a really, really good deal. Puts us in at around 50% of the ARV. We intend to put about 20 into the property. So in the property for roughly 60, which will give us a good finish. As you can see as we walk through it needs a lot of work. But we will be able then to get it rented, and refinance our money out of the property. So let's go inside and look at this beauty.
So currently the property set up is a two bedroom one bath. It has a basement, no upstairs. It is in need of a lot of repairs. Mike, do you want to tell us a quick story about the seller, and how we got this property?

Mike: Sure, we are actually buying it from another investor. But the seller; they ended up with the house, they were sitting on it for several years. They came over one day to clean it out. You can see underneath the kitchen sink was a pipe bust, again a lot of water, when they came over they said, forget it, I am going to go ahead and sell it. They called my buddy, he called me and we said, yeah we will do it. So it was a pretty quick, pretty easy deal that we picked up here.

David: So they bought and were going to do what we're doing with it? But years and years went by and never got around to it.

Mike: The home owner, exactly.

David: So it's been vacant for several years, right?

Mike: Correct.

David: Let's take a look around. It's a two-bedroom one bath. We are going to convert it into a three-bedroom one bath, which will help increase our ARV, our appraisal, and our rent, all three. This is currently our dining room. We are going to swap out this light, put a door right here, the wall that off. We already have a closet as a pantry. So that will be our third bedroom. Right now we are in our main family room as you can see. The carpet looked pretty good, so hopefully we will be able to refinish these floors. When you walk through here you have two bedrooms and a bathroom on my left. So the bedrooms are a pretty decent size. A ceiling fan, we will probably swap that out. A closet, a couple of windows, very standard. The other bedroom right here, again very standard; a couple of windows, closet.
Bathroom here, there is no light so it is going to be kind of hard to tell. We will replace the vanity and the toilet. We will get rid of the doors here and glaze everything to make it all look pretty, white glaze. Get rid of the pink and put in some grey. Agreeable grey. Something that is nice and pretty but makes the bathroom look awesome.
Here is the kitchen. This place needs a lot of work, it is very dated. Tiles on the floor are all coming up.

Mike: I think we got asbestos down there. We are pretty sure it came from inside this wall, because the bathroom we were just walking back there is behind it. So most of your plumbing is right there in the center of the house. So again, pipe probably burst and--

David: We will be losing a dining room because we are adding a bedroom. So we are going to have this walled off with a door there. However, we will add an extra room on the bath of the house here. Which will basically turn into our dining room? It's a good size room, lot of windows. Right off the dining room, or the new dining room; we are going to have ourselves a nice patio. It has a metal roof on it and it's actually a good size. All this stuff right here will come out. It will give the backside of the house a lot more appeal by having the dining room and the kitchen which comes right out to a porch. If they want to screen it in they can, but it's a rental so that will be up to them. We are just going to clean it up, get a rent ready, get a tenant in here. From there get it occupied, get some cash flow. Go to the bank re-finance our money out and do it again, race to 100. We going to look at the basement real quick?

Mike: Yeah. The basement is interesting. If we were not able to put that bonus bedroom upstairs and we are lucky enough to be able to do that, we were thinking of how to do it down here, right? But since we can get it up above grade, that's a legal bedroom. That’s How to Rehab a Rental!

David: Makes it legal.

Mike: It is actually a value add for us to rent, and value add when we go to resell it.

David: Lower ceilings down here, not the best. With these basements, our intentions are not to come in here and make them real nice and spend much money, because it is not going to increase our rent. So what we're going to do is just clean it up, remove all the crap. Probably leave the walls, I don't think we will even paint these walls. We won't tear them out, just leave them in. Maybe paint the floors, plumbing stacks are in great condition. It looks like it has been replaced in the last couple of years. Water heater and hot water and everything else. Furnace and all that stuff looks good, it's not great but it works, why change it out? Keep it there, don't fix it if it's not broken. So again, we will just clean all this out and then this can become a storage unit for the homeowner, or I should say the renter that becomes our tenant.

Mike: Let's touch on a couple of other things. We have a dehumidifier running like crazy.

David: We do.

Mike: We got one we just set up over here, another one over here. We turned the fans off, we have got fans moving the air around as well. There was that water leak. So that is key to prevent mold from growing.

David: Right.

Mike: Keep that air moving and dry everything out as best we can.

David: Let these run for a couple of days.

Mike: A couple of bucks.

David: What is today? Tuesday. We are closing this property on Friday. So basically on Friday we are opening it all up. All the moisture and the air will be sucked out with the s, keep the air flowing. Then hopefully this weekend or the first of nest week we will have our crews in here, start removing everything, cleaning it all up, replacing what needs to be replaced, paint what needs to be painted. Within maybe three or four weeks give or take, we should have a sign in the yard that says, for rent. So it is going to be a quick turn around project for us because it's a rental. The numbers are going to make a lot of sense on this property. We paid just under 40 for it, 37,900. ARV with the added bedroom will be over 80. Projections are about $20,000 worth of work that we are going to put into this property. We will update you guys once we are complete with the final and our numbers and see how close we are to our averages and guesses. We ill see you on the next one, thanks.

Mike: This is Mike, I am over here at 2009 Wismer. This is just a quick update on the rehab. This will probably be the only one I do because it doesn't take us too long to get these flipped over. We are in the main living area, a little bit of carpet. You can see we have pulled that up. Again, these wood floors are in pretty good shape. So we are going to get that refinished. We have all the raw materials here for the guys, we got to be on it because they are going to be finishing this real quick. All we have done so far essentially is gut everything out. I just wanted to give you a quick look at everything now that it is missing. We have removed everything from the kitchen, go ahead and clean up a lot of the electrical wires, all the plumbing as well, and redo this kitchen. Nice little surprise, there is hardwood underneath that old tile. So we may be able to save that, refinish that instead of having to put another floor in.
In this back bonus room back here, we ripped down the dropped ceiling, give us a little bit more height, probably going to drywall that ceiling, going to look real nice. So again, just a quick update.

David: Alright guys, this is the after video for 2009 Wismer. We are going to walk inside and take a look at what we've done to make this rent ready and rehabbed. Let's take a look.

Mike: Come on in.

David: Alright, so last time I was here, there was trash everywhere. These windows are new?

Mike: Windows are brand new.

David: Those look nice, very nice. This was the dining room, was going to put a wall up. Look at that, there's a wall there. Looks nice, new fan. That was a pantry before, right?

Mike: It was.

David: This looks good, Mike. Good work. New flooring in the main hallway and kitchen it looks like. Let's go back to the bedrooms here. New windows, floors look like they have been re-finished which is good. New fan like we talked about in the last video. Bathroom, night and day. I think we were going to glaze it, but decided to rip it all out.

Mike: Well we had to access the plumbing so had to rip out some of that tiling.

David: This looks better than I had originally thought. New vanity, new toilet, new tub, new tile, window looks original. But it looks great, guys. Super clean. We are missing a mirror but that's an easy fix. So again, there used to be a door here, guys, that walked into the other room. So we just walled that out, ripped out all these cabinets that were here. All this is all new. Standard cabinets, dishwasher, stove, microwave. Doesn't have hardware on it, but don't really need hardware on it, it's just for rental. Didn't we pull this from somewhere else in the house, Mike?

Mike: Nope. That's simaler-- you're thinking of the other property.

David: This is basically our new dining room. We talked about that in a previous video. These floors look really good though. These a vinyl floors right? Clipped together, vinyls, real simple. Kind of a galley kitchen, but so what? You turn it into a three bedroom one bath from a two bedroom one bath. This was all full of trash on our last video, cleaned it all out so now it's a nice patio here for the tenant. Took down all the blinds and everything, cleaned out the shed. As you can see it has a little yard, nothing major but this is a great rental, guys, great rental. So, Mike, let's talk about some of the numbers on this one. What did we spend?

Mike: Sure, so our original purchase price-- I think you just watched the video of the last walk-through was 37,500. Our total rehab was just under 20,000 so we will round it up to 20.

David: 20, okay.

Mike: So we are into it for 57,000.

David: Okay.

Mike: Did you see the appraisal report come back?

David: I did not.

Mike: Appraisal came back at 110.

David: From 57.

Mike: And we are into it for 57, let's call it 60.

David: That's $50,000 more than what we are into it for.

Mike: Right, we will get all our money back. Probably leave most of that into it because again, we are going to get equity, and some good cash flow on it. Going to cash the equity and still get good cash flow.

David: This is a great property.

Mike: Again, we are thinking it is probably going to rent for at least $1000 a month.

David: Is there a basement here? Going to go downstairs real quick.

Mike: Yeah, we think it is going to rent for at least $1000 a month because it is a three bedroom now, and because it has been updated. The basement, if you remember in the last video Dave was talking about-- we don't do a lot to the basements.

David: Keep them clean, it doesn't really add much value to the rent, guys.

Mike: So we painted it and put flooring down.

David: Yeah it looks great.

Mike: That's all we do.

David: Ceilings look a lot better too for some reason. Did you guys pull the drop ceiling out?

Mike: We did. Pulled the drop ceiling down.

David: Gives it more height.

Mike: Exactly.

David: Doesn't look so small now.

Mike: Exactly, because last time I think Dave it was right above your head.

David: It was very low.

Mike: Some cheap doors. Kind of our their tier team. They put some cheap doors just to cover that up.

David: Looks good though.

Mike: Pretty much it, just keep it simple here in the basement, right?

David: Yep keep it simple, keep it clean.

Mike: It's a pull switch way in the back. We should get a light wire over there.

David: Okay.

Mike: This is the storage area, we didn't do anything in this one.

David: Washer and dryer can go right here. Hook ups for a washer; hot and cold.

Mike: Yep.

David: So this is a good one guys. This is a really good case study because we are not into this property for that much. We are into this one for less than $60,000. Appraised for 110, it is a perfect example of the BRRR strategy; Buy, Rehab, Refinance, Rent. I don't know if I screwed up one of those R's, but that's the strategy. Buy it, rehab it, get it rented, refinance all your money out, as much as you possibly can. In some scenarios you can pull more money out. But in this particular property we are just going to pull out every penny we put in, leave the rest into it as equity, which will also reduce the mortgage amount, which will, therefore, increase our cash flow figures. The aim of this business is cash flow, so that's where we're at. Thanks for coming in and checking out the video and we will see you on the next one.

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