Real Estate. America’s 2nd job. George Washington was a Real Estate speculator. I think he started it.

In 2017 my wife and I decided we wanted to buy a rental. She loves scouring Redfin and Zillow. It’s like her addiction. So she already knew all about the market. She had her eye on a couple of neighborhoods. The one we liked the best was all small, builder grade houses built from the 1950’s through the 1960’s. A few had started to get remodeled, but most were just lived in housing. The location was prime. Maybe 10 minutes from some of the coolest haunts in town (which are themselves about 5-10 mins from downtown). So downtown in 15-20, but located on the hip side of the city. The schools were a downside, pretty crappy.

The woman selling was a disabled senior citizen. They had come down from $279K to $249k recently, and interest was picking up big time. It had been on the market for 4 weeks already, but this price downturn really got people excited. We went over there several times and it seemed there were always other lurkers there too. The issue was we weren’t really in a hurry. We felt like we had just started looking for a rental, and this one needed work as well as still looking a little weak on the rental rate vs the purchase price. We thought it would rent for around $1600/month. But insurance, property taxes and maintenance made that look like a cash flow loss (just barely). However, I told my wife we were really in this for the appreciation. She agreed.

My wife is an Attorney, and in our state that means she can submit offers on her own. That means 3% of the commission, we could argue, wouldn’t be warranted and should belong to us. However, we knew realtors generally hate the idea of sharing commission with a non-realtor. The seller agent technically doesn’t have to, they can just take the full 6% if you are acting as an Attorney, though most won’t try that if they don’t represent both sides officially.

We talked about it, and knowing how slimy realtors are (we’ve been on the receiving end before of a realtor’s shady behavior) we decided to play the game their way for once and use it to our advantage. We called the realtor and explained that since the house was smoked in (this senior citizen was a smoker, really gross) and it needed a ton of work, we would like to offer $210,000. We knew it was way lower than current asking and that they had a ton of interest. But two things to keep in mind… 1) we have all cash and will close in two weeks and 2) we have no realtor and are happy to have her represent us and take the full 6%. That’s right, we didn’t play the lawyer card. We hung up the phone and I didn’t expect anything to come of it since our offer was ridiculously low. However, if accepted it would turn the property into a cash flow positive investment which mattered to us, and like I said, we weren’t in a hurry. I really thought there was no way this was happening, but didn’t care. We honestly talked about whether or not it was worth it to make the phone call. I’m glad we called her.

We were shocked when the realtor came back the very next day with the news we had the contract! It became way too good of a deal to let go. Honestly, I still feel icky about the senior citizen. I think her realtor sold her down the river for the double commission. I have no information and no evidence, but I know realtors. She probably spiked multiple offers on that poor woman. If that’s true, that’s on her realtor though. Like I said, I have no information of any of that, and the realtor would never tell if that’s what she did. It could also be that no other offers had yet been received and she took ours immediately before anyone could act. That’s also quite possible and would cover her ass if questioned because she doesn’t “have” to go out and tell everyone to put in best and final if she gets the client to agree to a deal without it. I do know that the quick action, absolutely no counter offer, and no negotiation seems really unusual. But we became 2nd home owners two weeks later. It also reinforced one of my maxims

“Always be aware of who is holding the power of the purse, and play to their interest.”

We put $12K into it immediately. It’s a really small house (1,100 sq. feet, 3 bdrm 1.5 bathrooms). We got Home Depot dudes to paint the inside and outside for $6K and used the other $6K for duct cleaning and full smoke remediation work. I would say it worked around 80-90%. WAY better, but still not necessarily pleasant interior smell. We covered with Glade plug-ins and got it on the rental market. It went pretty quickly for $1650/month!

We kept those renters for two years, then when they left it became an office for my new startup company. We took the opportunity to remodel the main bathroom as well as redo the laundry room to make it more usable space as a home office or play area as well (it’s kind of a big laundry room that was more a storage shed feel before we redid it).

The house peaked at $520,000 valuation in late 2021, but now in mid-2023 I think it’s back down to around $450,000. Still VERY happy with this investment. It’s rented right now for $2100/month and the renters just renewed through July 2024! They’ve been completely easy to deal with. I think two calls in the last year which were easy fixes. I wanted to sell it in 2022, and we actually double listed it (sell or rent) but all the interest was on the rent side so we’re happy to keep the cash flow. I think with interest rates so high right now the market is not great for sellers, so we’ll wait it out 🙂

Now if I can finally get my wife to agree to take out some debt on it! She hates debt, but owning it out right bothers me. Real Estate is about leverage, am I missing something? I guess now with the interest rates so high it’s harder to argue my side. But we have that capital tied up. Ugh. I need an opportunity to put in front of her that is tangible. Anybody agree with my wife, let me know?