Analysis of Deal: Property at 61st Way N, Saint Petersburg, FL

The property at 61st Way N in Saint Petersburg, FL is one of the first deals as a real estate investor. It is a single-family residential home, a 4-bedroom, 3-bathroom 2,250 square foot property just 15 minutes from downtown Saint Petersburg and 15 minutes from St. Pete Beach.

I currently reside in the property and rent out the bedrooms to cover my mortgage and other living expenses. I bought the property in April of 2021, financed 86% of the home’s value, and remodeled the home to add a bedroom and a bathroom. Afterward, I took out a $60,000 home equity line of credit (HELOC) on the property to fund my next deal, also what is referred to as the BRRRR (Buy, Rehab, Rent, Refinance, and Repeat) method.

I was still new to real estate investing at the time, so the home was a big learning experience for me. Luckily, the numbers worked out very well. I was able to remodel the home in a short time and I was able to get the rooms rented in only a few weeks.

Here are some general details of the home:

Purchase price: $287,000 ($127.5/sq ft.)

Down payment: $40,000

Closing costs: ~$11,000

Appraisal: $316,000

Rehab cost: ~$30,000

Monthly mortgage and escrow: $1,429

Monthly rental income: $2,550

Cash flow: ~$1,100

Current Value 2022: ~$450,000

1. Purchase: I identified the property in February of 2021. When I first found the home, the seller had listed the home for $340,000. The home had been on the market for 3 months by the time I found it. During this time, I was based in New York. I had gone down to Tampa for a weekend to check out the real estate market and visit open houses. It was during this weekend that I came across the home and happened to find the agent that I continue to work with to this day. At $340,000, the home was out of my price range, so I forgot about it. However, the home never made it under contract. Because the home had been listed too high it had gone what appraisers call “stale.” I put in an offer for $280,000 on the home, I included a letter to the homeowner introducing myself along with my offer. The homeowner countered my offer at $287,000. I agreed to the price and we were under contract.
2. Inspection: The home had not been updated in the 30 years that the occupants lived in it. The baseboards were all different sizes and colors, the flooring was different and worn in every room in the house, the light fixtures were old and rusted, the bathrooms had outdated vanities, and the home had not been painted in over a decade. The inspector found pests in the home, valves that did not have angle stops, an AC unit that was not blowing air, and termites. I tried to negotiate the seller down to $260K, but she would not budge from $287K. I ultimately decided that the home was still a great deal even at $287K. I closed on the home in April of 2021, on the condition that the owner makes the necessary repairs. She needed to tent the house to get rid of the pests and termites, and fix the plumbing and electrical issues in the home that the inspector identified, to which she happily complied.
3. Lending process: The lending process was fairly straightforward. I used Chase Bank and secured a rate of 2.875% on a 30-year mortgage. Because I put down only 14%, I am required to pay mortgage insurance of $40 a month. The home is my primary residence. Because I was working as an independent contractor at the time, my income only qualified me for a max loan of $275,000. I had a family member co-sign with me. For this reason, the lending process, and the documents that the lender required from us, were just slightly more complicated than if I did the deal by myself. Regardless, we were able to close on the property 6 weeks after having our offer accepted, a 2-week delay on the part of the lender. It goes without saying that you should have all your required documentation ready to send to your lender before your lender requests them. If it is your first deal, you might not be clear on exactly what documents you will need. However, with the more deals that you do, you begin to get a sense of exactly what lenders will ask you to provide. Other investors usually compile a packet of all the necessary documentation that they have ready to send to lenders with each deal they do. This speeds up the process and avoids delays.
4. Renovation: I had 3 different contractors provide me with estimates on renovating the home. Before I decided on the scope of work, I called the appraiser who valued my home at ~$30,000 above the purchase price and asked her what she thought would add the most value to the home. She recommended I modernize the home, add ventilation to the garage area (which was a converted room without ductwork), replace the drop ceiling in the garage room to make it look like the rest of the house and be able to add it to the square footage of the home, change the fixtures and vanities in the bathrooms, put new flooring so that each room matches in like and color, and paint the walls. When I purchased the house the appraiser classified it as a 3/2 instead of a 4/3. Because I made the modifications she recommended to the garage room, I was able to make the garage room count towards the total square footage of the home. Renovations took 3 weeks. Once complete, I was able to rent the property fairly quickly.
5. Rental: When I listed the property online, I received hundreds of messages from potential tenants. I listed the bedrooms by size, starting at $750, $850, and $950 for the larger bedroom with a private bath. At first, I priced the rooms less, but because I received so many requests I increased the rent. I found a rental agreement contract online and modified it to fit my situation. I interviewed about a dozen potential tenants and did background checks, as well as checked their social media profiles before I decided on the 3 tenants that I would allow to live in the home. I’m pretty easygoing regarding rules. My biggest concerns are keeping the home clean, no loud noise at inappropriate hours and that rent needs to be paid on time. A few other things I included were no smoking inside the home, no guests for longer than 7 consecutive days, and no subletting of any kind. I feel that the more homely you make the living experience and the fewer rules you have (aside from the absolutely necessary ones), the more you can charge in rent and the longer your tenants will actually choose to stay on your property.

Overall, I am happy with how my first deal went. I was able to buy a large 2,250 square foot 3-bedroom 2-bathroom home that was easily convertible to a 4-bedroom 3 bathroom property. I was able to close quickly without many hiccups and I was able to quickly find a contractor who was able to begin immediately and was cheaper than the other contractors I screened.

The only thing I would change about this deal would be to have the contractor write up a more detailed estimate, and put every little detail in writing before the work begins. I would have incentivized the contractor with a bonus for finishing early and a penalty for finishing late. I would have made sure that any and all extra work was accounted for beforehand and that these items were discussed prior to the work beginning. It would have saved me several thousands of dollars if I was able to foresee these events beforehand. What I’m talking about is extra labor that comes up during the renovation process that the contractor and the homeowner are unable to predict. This is fine, as it was my first ever deal, and I couldn’t imagine predicting every little thing that could come up. However, now experienced, I know what to expect to a certain degree to better be able to estimate how much rehab will cost on future properties.

Many contractors lock you in with a sweet price for the labor and then throw in other costs once the job has commenced. In order to avoid this, discuss with your contractor your budget beforehand so that when things do come up you are able to make the decision on whether or not you truly want to commence with the work. Expect a 10-20% increase in cost and time, which is an industry standard.

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So there you have it: my very first deal, my first residential property ever purchased, and the first home that I get to call mine. I loved every minute of this deal, from the very first time I stepped foot inside the home during the open house to the moment that I got the keys in my hand, from when I negotiated with the seller all throughout the buying process, until I was able to finally start making rental income on the home.

Now I can call myself a homeowner, and I am able to live for free while I save my money for future rental properties.

If you have any questions regarding anything I have written in this article, please, feel free to reach out to me at any time. I am happy to discuss this deal or other deals I have done in order to help you grow.