This week’s Income Property featured Sarah and Jim, newlyweds and blended-family participants who have an investment strategy that makes Scott McGillivray look conservative. But will their foray into real estate be too big of a gamble?
Sarah and Jim recently married and are of the Brady Bunch persuasion in that they have five kids from previous relationships. With the idea of paying for school for all of those kids boggling the mind, the parents have decided to take on the financial strategy of buying income properties and building a real estate empire. That’s a sensible plan, though their goal is to get four properties in five years. Ambitious.
Scott McGillivray takes the couple on a tour of some houses and they settle on a $250,000 back split house. The upstairs portion of the house is move-in ready, so the renovation will focus on the back/basement portion of the house. The area needs a lot of structural work, including creating windows, possible extensive foundation repair, and addressing heating issues throughout the space.
The heating issues are insane because the previous owners had no clue what they were doing. Even I know you do not need to put insulation in interior walls (yeah, that happened). And that ductwork needs to be connected in order to work properly (that also happened). Or that the dampers in the furnace need to be open to allow heat to travel through whatever ductwork was properly connected (ok, I probably would have missed that one).
During the renovation, we learned that Sarah and Jim rented the upstairs for $1,250. Not bad, especially since Scott ballparked $1,200 for the space. He was not even close to the ballpark for the renovated space: he expected $700, but the realtor told him that would be a giveaway. I agree: the space was bright, inviting, modern, and arguably my favorite renovation so far this season. The recommended asking price: $1,200. Whoa! The carrying costs for the house were $1,470, so that is quite a nice profit. Also, the house was revalued at $310,000, giving a nice equity boost and a solid down payment for house number 2.
My DVR cut off just as Sarah and Jim gave Scott a much-deserved hug. So how much did the couple get for their new income suite: