This week marks the one-year anniversary since we became intentional property investors! (Read here to find out why I say “intentional.”) We’ve learned a lot in this process, with more still to come. But overall, it’s been a great experience.
Let’s take a look at the property we bought a year ago.
We were undecided about what type of investors we wanted to be and what type of property we wanted to buy. We knew long-term wealth creation was the goal, but getting there can take many paths. So, we looked for a property that we could either buy and hold, or fix and flip.
These are two very different investment ideologies. Long-term equity building vs short-term cash injection. Minimal rehab vs complete reno. Dealing with tenants vs selling/repeating the process.
We landed on wanting a house that needed work but was a manageable size in case we needed to gut it. Ultimately, like most things in this business, it came down to price. We needed to stay under the $200,000 purchase mark and not go too far over it with the rehab costs.
In Hamilton, this meant we were looking at a few specific areas, namely the North End and Crown Point. Both neighbourhoods have been historically undervalued, were experiencing a renaissance of interest and development, and both fit the above pricing and condition requirements.
After a few weeks of looking, we came across a house in Crown Point, literally steps from the booming Ottawa St shopping strip. (For more info on Crown Point, read my Top 10 reasons to invest in the neighbourhood.) It had been on the market for nearly two months, which in the hot Hamilton real estate market, definitely piqued our interest. It only took two steps in to realize why…it stunk. A two-storey nasal cocktail of animal smells, waste and, what we found out later to be, raw sewage.
This house was not for the faint of heart, but we were able to look past the stench to see the value. What we saw was a two-storey, 3 bed, 1 bath home with parking and a private back yard. The house itself is small, roughly 1,200 sq ft, but held opportunity to make it more functional.
Because of the smell and a motivated seller, we were able to purchase the property under our price limit, leaving room in the budget for improvements. After a quick close, we started demo. The pet-stained carpets were the first to go. Then the sections of drywall which were also holding the smells. Instantly, the house was livable again.
We created a short list of items which needed attention, including:
– Opening up the wall between the kitchen and dining room. This was non-load bearing so a relatively easy and cheap procedure.
– Building proper closets in each of the three bedrooms. Each room had a nook where a closet appeared to live previously, but no doors, rods or shelves.
– Upgrade flooring in the main hallway through the kitchen and den. It came with lick-and-stick linoleum tiles which were holding some smells and were in rough shape.
– Upgrade flooring in the bedrooms. Removing the carpets exposed original floors, which were unfortunately severely damaged and patched in many places. We went with new carpet in the bedrooms.
– Upgrade appliances. By this point we had decided to hold it as a rental, so a top end stainless steel appliance package wasn’t necessary, nor was it in the budget. That said, out future tenants would need reliable appliances which would save us headaches in the long run. Also, we wanted to add a dishwasher and update the washer-dryer combo.
– Build a half-wall railing up the stairs. The lower flight was open and we wanted to make sure that any tenants, especially kids, would be safe going up and down the stairs.
– Upgrade light fixtures. Nothing fancy, just wanted them to be clean, modern and safe.
– Paint. Everything. The previous owner had a penchant for dark colours. Given the smallish spaces, we wanted to lighten the entire place up.
To top all of this off, Tom and my dad were planning to do all of the work themselves, minus the structural work of opening the kitchen wall. Heading into Christmas with limited time on their hands, somehow, they got it all done. We threw in a top-to-bottom scrubbing and a duct cleaning to boot.
We posted the ad on MLS and kijiji and had a significant amount of interest. We were able to sign a one-year agreement with a tenant commencing March 1!
Due to extenuating circumstances, the tenant requested an early release from the agreement, to be effective just before Christmas. We decided to oblige this request as there’s no sense keeping people in a situation they don’t want to be in. We’ve already leased the property to another nice couple starting on New Year’s Day.