And now I’ve been bitten again…
Unlike previous real estate purchases we didn’t set out looking for something. Instead something jumped in my lap.
There’s a property that’s down the street for me that’s been on the market for the entire time we lived here. It’s a colossal estate with a driveway so long you can barely see the house from the street. That’s always added a bit of mystery.
I searched for the property on Zillow and found what I expected… a property that was priced at 1.5 million. That’s a bargain price compared to the 2.5 Million it was listed at a few years ago.
Either price might as well be $10 million, because with our current real estate properties it isn’t realistic at all.
However, I got an email saying that the asking price had dropped to under a million. Six figures? That’s something that I at least have to kick the tires on. There’s always a chance that I bring a friend on-board as an investor.
So I sent an email to my real estate agent to check it out. I did this fully expecting more red flags than an MLM pyramid scheme.
However, if it came out clean, just maybe there something there. After all, the interest rates are good (keep scrolling after this calcultor, there’s a lot more to the more story):
The property has been on the market for more than 4 years now. The owner seems to be having some financial trouble and it’s a short sale and soon to be foreclosed upon.
That’s reason #1 why the price reached six figures. Another reason is that the home doesn’t look like the pictures. My guess is that it looked that way when it was first put on the market. However, four years of New England weather has done a number to the paint. Other parts of the interior look like they need some updating.
So what do you get for almost 7 figures? The property has two houses on it… over 6000 sq. ft. of living area spread over 5 acres. The “guest house” at 2000 sq.ft. is actually bigger than what we live in now. It has four bedrooms, but they are small. It’s historic, predating the Emancipation Proclamation, but it is recently renovated with marble counters, stainless steel appliances. It is surprisingly very nice.
The main house is 5 bedrooms. It consists of a main portion of 3 bedrooms and an in-law suite of 2 bedrooms. The in-law suite doesn’t have a full kitchen, but a bar with running water and a fridge. There’s more than enough room to make a kitchen.
Overall there are 9 bedrooms on 5 acres of property, covering what I’d call 3 units. (The county’s official zoning board may disagree.)
At first the idea was to go live there. I thought of living in the guest house and renting out larger property. The wife wanted to live in the big house and rent out the guest house. However, it doesn’t look like either scenario will work. The big property needs some updating and my wife didn’t like the layout of the main house/in-law combination. The guest house is a better fit, but the small bedrooms make it less desirable than the house we have now.
So my idea would be to buy it and use it for what it was intended for… running a bed and breakfast. If you’ve met me, you never would have pinned me for doing such a thing. Honestly, I’m pretty sure it isn’t what I want to do. However, there are some things like weekly rentals and AirBNB that do very well in my area.
The question would be whether I could make enough income to offset all the expenses. I created a spreadsheet of expenses and it goes on forever. I was overestimating expenses and I think I found that it was over $8000 with principle, interest, taxes, insurance, maintenance, and utilities.
The big wildcard is that I don’t know anything about running a bed and breakfast. I can guess at the expenses, but I know I have no experience. I can guess at the income, but that’s even more difficult to forecast.
Most importantly, I am self-aware enough to know that I don’t know these things. I know enough to not jump into this without doing a lot more research first. I also have a good network of friends with extensive real estate investing experience to gather advice on.
I’m going to continue kicking the tires on this one a bit. If nothing else, I’m learning a lot in just going through the process.