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Part Two - How to make your property work for you!

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The Decision! (580 words - 5 minute read)

It's a numbers game, but it's NOT JUST a numbers game! 

In this weeks post I will talk about the decisions we made and more importantly WHY we made them. 

When most anyone talks about investing they hit you with numbers and formulas and charts galore which are the basis of almost any smart real estate investing decision. These are the principals and foundations of investing but you can't forget or overlook the most important aspects of handling a property you own, the emotional attachment and history created in that property. The numbers have to make sense but the emotional implications both short and long term are also extremely important when deciding on the next steps. Most times the thought of selling a home with that much history is extremely overwhelming. 

In our case the emotional attachment played a huge role in the decision making process. Think about it, My mother had spent 30+ years in this home and raised a family, the countless memories shared by all of our family members. Christmas mornings, birthday parties, bonfires, and countless other milestones that this home acts as the backdrop for. 

Being confident in my ability to make this work for us I was sure that I could make the financial piece of the puzzle work but it was the emotional commitment from everyone that was the hardest to overcome. 

In my family I seem to be the most business minded individual so naturally keeping our home and making it work for us was my first thought. Working with countless investors and contractors first hand gave me the confidence to make this happen. When my mom started considering moving to a condo I went to work evaluating which approach would be the smartest financially. The decision was rather simple in my mind. My first instinct was to renovate before selling which had a nice upside. 

$200,000 as is market price

$58,000 estimated cost of reno

$300,000 fully renovated market price (ARV)

$42,000 profit

My mom could then take this extra profit and use it to buy her condo and only have a minor mortgage payment. This is where my mind started to work like an investor. What if we kept the property? Wouldn't that be better for the emotional implications? Could it also make my moms condo payment even less over time? Could we shrink up front cash needed for reno? The surprising answer to all of these questions was YES! YES! YES! 

Now that we were keeping the property the emotional separation seemed much easier all around as we didn't have to worry about what the new owners would do. 

If we got the house rent ready our reno budget would be cut in half to $30K. (The biggest change to this budget being the replacement of all windows and repairing/painting the exterior siding and deck)

$30,000 rent ready renovation budget

$2,000 per month in income

$500 estimated extra monthly income for mom after condo payment

I estimated that we could rent the house around $2000 per month which would be enough to handle all of the expenses for the property, my moms condo mortgage, and some additional profit! All around this seemed like the smartest decision, not just financially but also emotionally. While a bit nervous, everyone was on board with the plan so we went to work. 

 

Next week I will talk about the planning and budgeting process and what steps I took to ensure the project ran smoothly.

 

Gary Gay - REALTOR, real estate advisor, business owner, investor?

REagentGG@gmail.com

413-427-5506

 

DROP YOUR COMMENTS OR QUESTIONS BELOW! I WILL ANSWER ALL QUESTIONS PERSONALLY!

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