Rehab on Historic Home
Turns a Tidy Profit
by Jane Hodges
June 30, 2005
The investor: Catherine Cash, 45. Ms. Cash is an inspector for the Virginia Department of Agriculture. Along with her husband, Luther Cash, 49, the superintendent of the Montebello Fish Cultural Station in Montebello, Va., she owns three historic properties in Virginia's Shenandoah Valley. She says reading "Rich Dad, Poor Dad" by Robert T. Kiyosaki (Warner Business Books, 2000) inspired her to get into real-estate investing.
The property: The 1827 brick house, a former Methodist parsonage, sits on
a half-acre lot in Fairfield, a small community outside the college town of
Lexington. The 1,800-square-foot home has two bedrooms, one and one-half baths,
a walk-in cellar, four fireplaces, hardwood floors throughout and a
3,000-square-foot deck.
Purchase price: $98,000 in 2004. The property went to auction as a foreclosure for $143,000, but when no one bid, the bank took it over. The Cashes made a contingency-free offer to the bank. To finance the deal, they made a 20% down payment, took out a conventional mortgage and secured a $50,000 line of credit against another property to fund repairs.
Additional investment: $30,000. Work included repairing previously unusable chimneys ($12,000), repainting all interiors ($6,000) and renovating the kitchen ($6,000). Other costs included major floor repair in one of the bathrooms and assorted minor fixes.
The strategy: Ms. Cash said a restored historic property fetches more than recent construction for rent or resale. She said she and her husband plan to hold this home long term, possibly retiring there later. She also said she believes in "profiting at the time of purchase" by buying properties below appraised prices. When she bought it, this house appraised for $129,000 -- so she could afford to spend about $30,000 on repairs.
The payoff: The home's appraised value has risen from $129,000 in early 2004 to $217,000. In addition, they make a modest profit of about $200 per month from the $1,000 in monthly rent their tenants pay for a one-year lease. The Cashes are plowing that profit into a reserve fund for emergencies.
Next time: Ms. Cash said she'll make sure her preferred contractors are available -- and push harder to get better estimates from them. Historic homes are often tricky, she said, because contractors claim "they don't know what they'll find" once repairs start.
- Do you think this was a good investment? Share your thoughts on this property.
-- Ms. Hodges is a free-lance writer in Seattle.
Email your comments to rjeditor@dowjones.com.
