Let’s wrap up the story of the Foreclosure Project with a detailed review of the final numbers and some incredible before-and-after photos!
In the last update, I shared how we raced to finish the house in time for its new tenants to move in late December. While I provided some preliminary details, many of you wanted the full picture—both figuratively and literally. So here are the final figures, along with an extensive gallery of the transformation.
Final Costs and Effort
Materials:
- Estimated: $7,158 (including $2,000 for paint and miscellaneous items)
- Actual: $6,995
Labor:
- My Work (carpentry, plumbing, electrical, roofing, etc.):
- Estimated: 244 hours
- Actual: 224 hours
- Partner’s Contribution: 200 hours
- Paid Labor: $2,058
By including my partner’s hours at a rate of $35/hour (as in our budget), the total renovation cost was $24,593.
This was remarkably close to my initial $25,000 estimate, despite upgrades we chose to incorporate. For instance, we spent an additional $1,000 on sprucing up the front porch and roof, installed a dishwasher, and added higher-quality trim and woodwork throughout the house.
These improvements paid off: the house now rents for $1,200/month, instead of the originally expected $1,100. That extra $100/month translates to an additional $1,200/year, effectively justifying the upgrades (based on a 10% annual return on investment, the extra rental income supports a $12,000 expense).
Key Financial Figures
- Purchase Price: $113,500
- Negotiated down by $1,500 for roof/plumbing repairs.
- Closing Costs (Appraisal, Lender Fees, etc.): $0 (paid in cash).
- Renovation Costs: $24,593
- Utilities and Taxes During Renovation: $500
- Total Investment: $138,593
Annual Costs and Income:
- Property Taxes and Insurance: $1,600
- Maintenance Allowance: $500
- Annual Rent: $14,400
- Net Annual Cash Flow: $12,300
Cap Rate:
- $12,300 ÷ $138,593 = 8.9%
While a cap rate of 8.9% might not seem extraordinary for large-scale landlords, it’s exceptional for a single-family rental property in this area.
Single-Family Homes vs. Multiplexes
Though apartment buildings often appear more profitable on paper, single-family homes have their own advantages:
- Lower Maintenance: Dealing with one tenant for $1,200/month is less time-consuming than managing multiple tenants paying $600/month each.
- Appreciation Potential: Single-family homes can gain value faster in a strong housing market, as they appeal to emotionally-driven buyers. This property, for example, would sell for over $200,000 today—creating an equity gain of $60,000 in just three months.
Early Retirement Perspective
With just 2-3 similar properties, you could create a reliable income stream to support an early retirement. Assuming net cash flows like this one, you’d only need savings of $277,000 to $416,000 to achieve financial independence (compared to the standard 4% withdrawal rate from a stock portfolio).
Before-and-After Photos
Here’s where the magic happens! Below are some highlights from the renovation:
Exterior
- Before: The house featured a sagging, rotted porch with wire barnacles and a deteriorating roof.
- After: A rebuilt porch with blue-stain pine columns, a beadboard ceiling, and a galvanized roof. Still to come: slate steps for the entryway.
Living Room
- Before: Outdated trim and sloped floors.
- After: Wider doorways, straighter floors, and refinished wood by a skilled painter.
Kitchen
- Before: A poorly designed layout with shelves too low and no space for a dishwasher.
- After: Custom cabinets, a tiled countertop and backsplash, a new sink, and a dishwasher purchased for just $20.
Bathroom
- Before: Truly the worst room in the house—so bad that visitors gagged.
- After: A bright, functional space with a tiled shower and a custom sink table made from a $20 antique sewing table.
Garage
- Before: Missing shingles, wasp nests, and vines overtaking the structure.
- After: Basic upgrades with paint, new siding, and $4 windows from ReStore.
Lessons Learned and Looking Ahead
This project was both enjoyable and profitable, and I plan to tackle similar renovations in the future. For now, I’m holding off until I accumulate enough cash to fund another project. However, I’m open to teaming up with an investor or even taking on unique opportunities—like winter renovation work in Hawaii (yes, someone actually reached out about that!).
Epilogue
More than three years later, this property remains a highlight of my investment journey. It has enjoyed zero vacancies, minimal maintenance issues, and increasing rental income (now $1,700/month).
This project shows how a mix of smart planning, hands-on work, and strategic upgrades can create significant financial returns—all while having a little fun along the way.