You may recall that last month one of my real estate joint venture partners and I embarked on a new challenge with a property we recently acquired.
If you don’t already know, we are getting divorced! Our investment property that is 😉
After several bumps in the road including, trying to source specialized contractors who seemed endlessly unavailable and unattainable, a few contractors who took seemingly forever to get quotes for us and when they finally did they were 50-100% higher than original estimates provided, contractors who failed to come through on their promises and had to be let go due to “irreconcilable differences”, a cornucopia of structural, electrical, building and fire code compliance issues and holiday season down time leading to unwanted additional carrying costs, etc. we are now happy to announce that our “legal separation” is finally moving full steam ahead.
Unlike a typical divorce however, we actually stand to make more income from this legal separation instead of less, with a massive 10% of our return on investment coming in from positive cash flow alone, before any mortgage pay down and before any appreciation in value! In fact, we fully expect this property to conservatively generate over 40% annually.
I am not trying to brag here. I would only like to impart a few lessons I have learned during this project, to get us to this point, that I feel may be insightful for you as well. Here goes…
1) The key to success with this type of renovation is to ensure you buy the property for the right price. Our expected returns may seem incredible to you, but you should know that these are even after our renovations cost estimates have ballooned and are now more than double what we originally expected! So you need to buy right and have a buffer in your original renovation cost estimates for the “unknown” things that are sure to pop up.
2) It is possible to make mistakes, encounter countless hick ups and challenges in real estate investing and still be hugely successful. This is especially true if you hold on to your investment property for the long haul. We have not been short on challenges with this project. By following lesson 1) above you can mitigate many costly risks and mistakes you are sure to make with these types of projects, especially your first time around.
3) The property we purchased was by all accounts a perfect “flip” candidate property. We instead decided to explore a different strategy called Buy, Fix, Refinance and Rent to not only profit from our renovations once, as you would in a regular flip, but more importantly to build substantially higher wealth and profit over the long term, possibly even forever!
4) I have recently heard one of my very own mentors say “He who can deal with the most shit, wins!” If you choose to quit in the face of adversity or simply do not want to “deal” with all the necessary shit, you will lose. With all the challenges we have had to face and overcome thus far with this property I can wholeheartedly say that he is 100% right!
This is best illustrated by the fact that despite all the adversity we have had to overcome, in only one short month since work commenced (finally!), the 3 bedroom main floor unit of our single family home that we are separating into 2 legal units is finally completed.
In fact we have already found an excited tenant who is moving in on March 1, with first month’s rent already collected. Plus we fully expect the lower 2 bedroom unit to be fully completed and ready for occupancy by the end of this month as well.
The best part, is that I have now obtained first hand invaluable knowledge and experience on the process, costs and considerations required when deciding on converting a single family into a legal multi-unit home. The great part is that the lessons I have learned will not only serve me well the next time I decide to undertake this type of project, but will also be invaluable knowledge that I am happy to share with my own students and clients on their very own paths to financial freedom.
Better yet, my clients can now learn from my own mistakes, avoid making the same ones and potentially save thousands of dollars in the process. It is for this very reason that my clients absolutely love it when I act as a guinea pig to test new investment strategies on myself first to prove that they work and are effective before ever deciding to do so themselves. 🙂
Below you will find a few photos of the progress we have made in only one month from start to finish, culminating with the most recent photo above, on just the main level living room and dining room.
I will post more before and after photos on my Cloud9Life.ca Facebook page over the next few days and will continue doing so as our lower level unit is completed as well. If you are interested in checking these out and have not done so already, you can join my Cloud9Life.ca Facebook page HERE.
Dining room a few days prior to taking possession of the property
Living and Dining rooms after structural issues remedied
Ceiling in same space after house was jacked up to resolve structural issues
Dining Room post renovations with new windows, floors, electrical and paint