Category: Rentals, Remodels, Relocations and Real Estate

We are now under contract to buy this cute little townhome on Academy Ridge Road!

This is House #11, you can see more photos in my Day 13 post.

There was one other offer that came in right after ours, but this time we won the bid. I think part of what helped was we offered immediately after it went on the market (John hadn’t even had time to see it first), so were able to get under contract before the weekend. Plus, it being the Friday of a holiday weekend probably helped too.

One of the things I love about this house is it’s somewhere John and I would be happy living ourselves. I like being able to offer for rent a place that I feel good about. And it feels like a little bit of a safety net, if we did ever had to downsize, or move back into town for health reasons or something.

Inspections will be this coming week, with a hopeful closing date of only 2 weeks from yesterday.

The only question now is what to do with the remainder in the 2031 exchange. We tried to spend it out, but we didn’t want to over spend it. And we didn’t find a property we liked worth exactly the right amount, so we ended up under spending it. Our options are to take the remainder in cash and pay 35% tax on it, or to try and buy a little bit of land for cheap. A third option would be to use the remainder as a down payment, and take a loan to buy yet another rental, but neither John nor I want to do that.

I believe in paying taxes, but 35% of a chunk of money is still a chunk of money. I had originally been thinking something like 15%, which is the capital gains rate. But turns out, all gain up to the accumulated depreciation taken on the property is taxed at the Sec. 1250 rate of 25%. Then add to that the state tax, which in New Mexico would only be 2.5%, but since the property was sold in California, we have to pay the California rate of 10%. For a total of 35% tax.

On the other hand, what would we do with a little plot of low-end land? Land doesn’t generate cash flow, and there’s almost no appreciation in New Mexico, and it’s very difficult to sell land here. So we’d just have a piece of land.

I sure wish I could simply use 1031 funds for remodeling, because I could always find remodel projects, LOL!

Speaking of…the new windows have arrived at the Homesteads house, and they are just starting to cut the old ones out.

 

It’s hard to watch all the destruction going on at the Calle del Norte house, which we are buying. We’re set to close on Thursday.

Here’s a photo of a length of trench, with the casita in the background.

The new septic tank is in.

Now they are trenching for the drain field. The trenching is very deep. Here you can see the line going down along the bocce ball court, which connects the tank to the field, which is located out past the trees.

Here’s the tree I’ve been trying to save. If you zoom in, you can see some large roots have been severed.

 

Here’s one of the workers, carefully maneuvering the smaller of the backhoes between the bocce ball court and some juniper that I cut back, hoping to save. He had originally requested all that juniper be cut down. After I cut out about 1/3 or 1/2 of it out, he has room, but barely.

There’s a lot of disturbed ground out there now, and in the desert it will be years before it looks natural again, which is discouraging. But when you flush, you want it to go down…and stay down!

 

Meanwhile, as if I didn’t have enough to do running around saving trees, we are still bidding on potential rental property.

I saw three houses yesterday. I visited House #9 a second time, and also saw two new ones. I’m going to call them House #11 & #12, although I think I’ve actually seen more than that.

House #11 is in great shape! The conventional wisdom when buying rentals is that you should buy something in less-than-perfect shape, because you can negotiate a low price and then fix it up as needed. That is true in some markets and in some situations. It’s not as true for us.

 

For one thing, it happens that in our area, the cost of fixing up a property is quite high compared to the low cost of purchasing already updated property. Secondly, John and I would prefer to use our 1031 pre-tax money, rather than out-of-pocket post-tax money. So it makes more sense for us to pay for the upgrades in the sales price, rather than doing them ourselves later. Plus, we’re already in middle of a remodel on our own house!

 

The problem is, everyone else wants those perfect-looking houses too! There was a bidding war on the first house we tried to buy, House #7, and we didn’t bid high enough. It was too far over our budget.

House #11 is in a good school district on a nice, quiet, well-maintained street.

 

The only downside is it’s an attached property.

 

In the old days, I’d call it a duplex, but they don’t seem to call them that anymore. They also used to sell the two sides of a duplex at the same time as one building, but nowadays they sell the units individually like condos or townhomes. Maybe that’s why they’re calling it a townhome.  I’d love to buy both halves, but the other half isn’t for sale, and I’m not in a position to buy yet another rental right now anyway.  So half a duplex it is. (It’s the one on the left.)

 

This one has nicer materials than House #9; granite counter tops and modern tile in the kitchen and bathrooms.

It also has a gorgeous backyard. Nice backyards are hard to keep up in rentals, and some landlords opt for low-maintenance rock gardens and hardscape (paved patios, etc.)  But I’m a sucker for a beautiful yard. It just means that I’ll need to put some language in the lease about garden upkeep. Also I will have to be out there on a regular basis, checking up on it. There is a drip system, which will help. And that bright green spot of lawn is actually artificial turf.

 

We now have construction going on at both Calle del Norte and Homesteads. They are both within walking distance from the house we’re temporarily renting. So lately I’ve been doing a morning and afternoon walk to check on things at both houses.

This morning at Calle del Norte, they’ve brought in a much smaller backhoe, which of course they should have brought to start with, since they had already been out to scope the site. But at least it’s here now.

This guy is pumping out the old tank, getting it ready to abandon. The system needs a new tank as well as a new drain field.

Then when I went back at noon today, they were busily digging a deep hole for the new tank (with the smaller backhoe).

So far they haven’t impacted the chamisa, which is the bluish bush behind him. It’s a native that blooms in a beautiful, brilliant yellow. But I’m anticipating that once they start trenching, they’ll plow right through it.

By the way, do you have any idea how long it took me to figure out how to spell chamisa? I tried chemisa and chamesa and google totally failed me. I finally found reference to it on a local website.

Meanwhile at the Homesteads house, demolition continues.

A new septic tank and drain field is going in at the Calle del Norte house. It’s a bit of a no-man’s land out there at the moment. The sellers still officially own the house; it’s not ours until June 1. But they’re long gone, moved to Colorado. So they don’t care what goes on out there.  Of course I do care, but I don’t have a lot of clout because I’m not the owner yet, and I’m not paying for the new septic system.

Before the sellers left for Colorado, we had all met for a discussion about how the septic was going to happen; where it was going to be located, etc.  In attendance were myself, both agents, the sellers, and the septic company manager. We talked through the details, and the sellers signed the paperwork.

Then I went out there yesterday morning when construction was due to start, and discovered this enormous backhoe and a macho guy telling me he’s going to take out 3 trees, 2 of which were right next to the casita, and the third blocked the view of the bocce court from the neighboring house.

I told him no, he wasn’t going to take out any trees. Of course he didn’t want to listen to me. I called John, who is impossible to reach during the day, so I called our real estate agent, and stood my ground. We’re not taking out trees.

When my agent arrived, the backhoe guy started complaining to him that, “The lady says I can’t take out the trees but I’ll roll my backhoe into the arroyo.” Which is quite true, he would roll the backhoe into the arroyo if he tried to take that gigantic thing back there.

I said, “Get a smaller piece of equipment!” They don’t need something so enormous just to trench a ditch for a sewer pipe.

In the end, after threatening to back out of the sale if they cut down the trees, they agreed to let me prune the trees back, rather than take them down.

By that time, the seller’s agent was also out there.  He was reluctant to let me prune the trees since I don’t own the trees yet (presumably he was concerned I’d do a whack-job, and decrease the value of the property, then back out of the sale.) But I reminded him that the alternative was to take the trees down. Which he could always do anyway, if I ruined them.

Of course, all our power tools are who-knows-where in storage or somewhere, not charged, not oiled, no gas, whatever. So I ended up carving off huge tree limbs with a stupid little hand saw, which happens to be mine rather than John’s, so it was with my stuff and not buried in a storage unit or garage somewhere. But I couldn’t find my nice, full-length leather gardening gloves, so now I’m all scratched up. And sore!

 

Here’s the pine tree before pruning:

And here it is afterwards. I’m so sad! It is whacked. But I can clean it up later when I have more time and better tools.

 

I also had to take out about half of a juniper tree. It extended all the way to the bocce court there on the left. (Um, no, cement blocks aren’t part of the bocce game; it will have to be moved.)

By the way, they call these native junipers “trees” around here. They seem more like bushes to me, but they can get fairly tall when they are old. And they aren’t the landscaping juniper that people from out of the area imagine when New Mexican’s say, “juniper.”

We were outbid on House #7, which was a real disappointment, so we’re back to looking at houses again.

The one we didn’t get:

We have a very specific amount of money we’d like to spend. It’s the amount that’s in our 1031 exchange, from the sale of the California rental. We’re already under contract for the first rental, so we know exactly how much is left for the second rental. It’s an appropriate amount for a rental in Albuquerque, so it shouldn’t be a problem. Unfortunately, we’re just not finding a house we like for the right amount.

We’ve found townhouses we like, that cost less than what we want to spend, and we’ve found nice houses for more than we want to spend. We’re just not finding anything very close to our target amount.

So yesterday I came up with a somewhat complicated suggestion. There’s a house that needs a little bit of upgrades that is slightly below our budget. I can’t directly use 1031 funds to pay a contractor for upgrades. So I’m proposing that the owners do some upgrades at their own expense, and then I’ll buy it at over list price. This way, I can use the 1031 funds to pay the owners a higher price for the house, otherwise I have to do the upgrades myself using cash out-of-pocket. This is also sometimes done when people want to roll the cost of upgrades into their mortgage.

It does make for a more complicated offer though, because I’ll need to get a bid for the work we want done, and then include the bid in our offer.

The house we’re considering is House #9.

This house is less expensive than House #7 for several reasons. First of all, the school district isn’t quite as good. House #7 is in a district where the elementary, middle, and high school all score a perfect “10”. House #9 scores a “10” for elementary and middle, but a “9” for the high school. Still very good, but some people only want the best.

Secondly, House #9 is a zero-lot-line house. These are also sometimes called patio homes or garden homes. It means the houses are built right up to the lot line. In this case, each house gets one side yard and a backyard. The side yard wall is the neighbor’s house wall. These are still officially detached homes.

Here, I drew a sketch to show the difference between attached houses, zero-lot-line, and regular detached houses, since it’s hard to describe.

The third disadvantage of House #9 is it lacks curb appeal. This isn’t a big deal, but it will make it somewhat harder for me to get it rented. Prospective tenants look at rentals on-line, and I’ll need an appealing first photo. So at some point I’ll want to do something with the front yard. Maybe a little courtyard wall? Not sure yet what, but something. At least there is a tree. But the house is a funny shape.

Also the living room, which is along the side of the house, looks at the neighbor’s house wall.  You can see in the photo below, the windows on the left looking at the wall.  But there’s room to add landscaping, and it could be a pretty little private patio.

There’s also a backyard. I would paint that block wall and it would look a lot better.

The interior is nice, it’s just…um…pink.  The walls have a slight pink tinge and the kitchen counter tops are light pink.

I’m going out there with a contractor tomorrow, so I’ll know more then.

Our house has both tile and carpet downstairs. I’m not a fan of carpet, but I really like tile. I also like hardwood, but I find it’s not as durable. To keep the humidity close to comfortable in this dry, desert climate, I run humidifiers and I have a lot of house plants. I’ve accidentally stained wood floors before with over-watering or unexpected condensation. So tile is the most practical choice for me.

We decided to remove the downstairs carpet and replace it with tile. We didn’t want the added expense of chipping out the existing tile, so we went in search of tile that complemented the existing tile. Luckily, John was able to find a spare tile in the garage we could take to the tile stores, to try and find a complementary style and color of tile.

Here’s our existing tile. It’s a bit orange, which is popular in this part of the country. It’s actually more orange than in this picture.

I thought the best pairing would be a light beige tone tile, like one of these:

Turns out John likes dark, dramatic tile, because he doesn’t want everything all white and washed-out looking.

 

Ummm…I was thinking something light and neutral…so we were at an impasse.

Here’s John, talking on the phone with a colleague while we were at Arizona Tile.

They made us wear hard hats because there were big sheets of granite and quartz counter top in the warehouse. You can see how orange our tile is compared to his green shirt!

We struck out that day, so the next day I went back to the tile stores to try to find something halfway between too dark and too light.

 

Here’s some medium tones. None of which really match that orange very well!

Most stores let you borrow samples to take home. I was up at the counter, checking out yet another set of samples when suddenly, one of the store employees said, “I know that tile!” And he gave me the name of our orange tile. He knew who carried it, and he quickly gave them a call. Sure enough, they still carried it! So off I went to visit the store that actually had our original tile!

John and I briefly debated whether we really want orange tile for the entire downstairs, but we couldn’t settle on a better idea. So orange it will be!

The new tiles won’t be a perfect match because it will be a different dye lot. The tile guys suggested we use some smaller tiles as a threshold between the old tile and a new tile. They also suggested we use a different size tile for all of the new tile, so it is not so obvious if the color is slightly different.

 

To recap, we are buying a rental with a 1031 exchange. The rules for the exchange stipulate that we have 45-days to identify our new rental.  So last week we looked at 6 houses.

John’s favorite house was house #3. It sure has the curb appeal! It’s also very nice inside. Although I didn’t like how the 2-story neighbors looked down into the backyard. But the main issue turned out to be budget. It’s too expensive!

My favorite was house #6, primarily because it was the cheapest of the 6 options. Unfortunately, John didn’t like that house at all.

Stalemate! Time to recalibrate!

Most of the houses in the first set of 6 houses turned out to be too far over budget. Our budget for this rental purchase has been a moving target because so much is going on with the remodel of our own house, as well as the other house we are already buying. But we now think we have a more realistic target budget.

So we identified a new set of houses, at a lower price point.

House #7

I saw this one go on the market late on Friday and I emailed our agent immediately. I knew it would go fast. She wasn’t able to get us out to see it until this morning (Sunday), and by that time, there were already 4 offers on it, at or above list.  We quickly put an offer in too…over list and just a bit over our preferred budget.  It’s unusual for houses to go for over list in Albuquerque, but the ones that are newer, in excellent shape, and priced competitively do. This one is spotless, inside & out, and in the best school district in Albuquerque.

This is our first actual offer in our 45-day countdown. Wish us luck!

House #8

House #8 is also in the best school district, but barely. The neighborhood is mixed and older. As an older house (1977), is a good price for the size, below budget, but it has too many walls and not enough windows! The more modern houses are more open, light & bright inside. Also the sunroom is aging and will eventually need removed.

 

And what’s with the bars on the windows? I would take those down immediately. It’s not that bad of a neighborhood!

House #9

Next we saw this little one. It’s quite affordable, neat and clean, with high ceilings and an open layout. It’s in one of the better school districts, although not the best.

 

You can’t tell from the photos, but the interior paint has a distinct pink tinge. I’m not sure how badly that would put off prospective tenants.  A full house interior paint job is expensive. The kitchen counter top is also light pink.

House #10

The price for this house is very low. I really couldn’t figure out why it’s so low. I didn’t like the house very much, but it wasn’t terrible. I’ve certainly seen considerably worse. It’s in the second best school district, like House #9.

 

There was one odd issue – the stucco seemed to be spalling in several places.  There’s either a water/drainage issue, or a stucco issue. We’d probably have to install a couple of french drains in the yard and install better gutters and flashing. Or if it’s a stucco issue and not a water issue, we might even need to re-stucco the house. Even that worse case scenario wouldn’t really explain the low price. I think this would be a good option for someone on a lower budget than our target.

Next, we wait and see what happens with our offer on House #7!

Demolition continues and building starts!

We are taking out a small section of kitchen wall to open it up to the dining room. And oops, they discovered an unexpected water line! (You can see it in the picture running vertically on the far right.) They nicked it before they realized it was there, and apparently they got a good soaking before managing to get the water turned off. They’ll have a plumber move this line out of the way.

Typically I’d never remove a window.  I love the natural light.  But the evaporative cooler is just outside that window, and it’s loud.

This house has plenty of windows already. It’s up on a hill, very exposed with no tall trees or shade of any kind, in the middle of the desert.  It gets lots of light! Also you can’t see in the photo, but the entire wall to the right is all glass – a sliding glass door and a large window. Occasionally its nice to have a spot without direct sun.

Here’s the new subfloor, so the living room floor will be the same height as the rest of the house.

Our contractor says we’re ahead of schedule, yay! I can’t wait to get moved back in.