This week’s Income Property stars Erin, a woman who wanted to leave her cramped condo but needed an income property to afford a house. But will multiple surprises along the way turn her dream into a money pit?
Scott McGillivray and the Income Property crew helped Erin acquire a city bungalow for $350,000. His proposal for the basement: redo the kitchen and provide a dedicated laundry, open up the living space, install new floors, and update the bathroom to create a self-contained 1-bedroom apartment. This project would also require increasing the size of the driveway to comply with local rental codes. Pretty straightforward, but surprises are looming around every corner.
Upon first inspection, they knew there was water leaking into the basement and under the incomplete laminate floor. After tearing up the floor, Scott discovered the cracks in the foundation were more substantial than he first thought and had to bring in his guy. The verdict: the house was sinking and a full foundation repair had to get thrown in. As they were digging the asphalt, Scott landing on some concrete pads that needed to be removed. Fortunately, they were sectioned off instead of one giant slab, so that prevented even more expanded costs.
Then the city decided to get cute with the approval process. Storage areas had to be rejiggered and permits were held until new plans could get the okay. This delayed Scott (and Erin’s ability to collect rent) by another month. Oy.
Eventually, the renovation was finished and Erin was able to see what Scott did with the place. I wasn’t a fan of the mud-colored walls, but it seemed to match Erin aesthetic, so hopefully it would bring in a tenant who shares her taste. Here are the numbers:
Bought the house for $350,000 and renovated for $50,000 for a total investment of $400,000.
The new appraised value of the house: $435,000.
Scott estimated rental income of $850. The realtor bumped that figure up to $1,100. Not bad, especially when the mortgage is $1500/month.
How much did Erin rent her apartment for?