McCarty House Rental Performance

By October 2019, six months after purchasing our very first Detroit rental, I was ready to take on the Wayne County tax auction.

After weeks of researching the list and driving and walking a few dozen properties, I had my short list of ones I wanted to bid on.

The McCarty House was one of two homes we won that year in the auction. And, while this project was difficult, I can proudly say it was my first successful BRRRR deal.

I paid $43,000 for the home site unseen. 

Note: This is my fifth rental property performance update. You can view my last one here or the entire page of updates here.

It paid too much, but the home sits in the Morningside neighborhood, an area I’d fallen in love with. 

While it was a bit of an emotional purchase, I was ok with that since I believed in the area long-term.

Here’s how it looks when I plot out the total cash we’ve invested in this home as well as the historical debt:

We had about $104,000 invested in the home before the refinance. That means the rehab was $61,000. 

The home appraised for $120,000 which means we left about $18,000 cash invested in the property after our refinance. 

That’s the equivalent to 15% down whereas, had we purchased a $120,000 home outright from the start, we would have had to put $30,000 down.

So while this wasn’t a full BRRRR I considered it a success since we did better than a typical upfront financed deal.

By June 2023 we had all of this $18,000 out via cash flow. 

That’s 32 months. Not bad to have literally nothing invested in the property!

But, as always, it wasn’t easy.

I had to battle an occupant that was living in the home after purchase, a bad contractor, standing water in the basement, lots of mold, and rescuing cats that the occupants left behind.

Here’s how it all unfolded.

Buying From The Tax Auction

I had heard there were some great deals to potentially be had in the Wayne County Tax Auction.

The list of homes going up for auction is released weeks in advance and I spent a LOT of time whittling it down to a few dozen properties of interest.

Then I went and drove to each property, walked the exteriors, and gained entry when possible.

It was an adventure, and I definitely had a few uneasy encounters with pitbulls. 

Ultimately, my list shrunk to a handful of properties and I won bids on just two.

The McCarty house was one that I was pretty determined to win, again, largely because of my love and belief in the Morningside community.

While I was unable to see the inside of the home, I did speak with some neighbors and got a bit of the backstory. 

The previous owner had supposedly passed and the tenant was left in the home, not paying rent to anyone for a couple years.

So I knew, after winning the auction, my first task would be making contact with the occupant and feeling things out.

Stabilizing The Property

Once I paid for the property a week or two after I won the auction, I attempted to make contact with the tenant.

I came prepared with a note in the event she wasn’t home, and I ended up leaving it on the door. To my surprise, she reached out and we scheduled a time for me to come by for a chat.

It was 6pm when I met Ms. McCarty at the home.

She never once gave me her first name but we sat on her couch in the living room as I explained that I was the new owner.

Foolishly, I thought I could somehow get her back on a lease. We verbally agreed to a rental price of $650/mo and I left a lease with her to look over.

She also showed me a bit of the house, specifically, the basement that kept backing up with water. They were actually pumping water out the window every time they did the laundry.

I told her we’d be able to get that fixed once she was on a lease.

But Ms. McCarty dragged her feet doing that and we ultimately decided we weren’t going to be able to work something out.

We moved for eviction.

Ms. McCarty Had To Go

The Eviction process was pretty easy here. We started it on December 9th, 2019 and had possession by January 16th, 2020.

Those were the days!

In hindsight, it sounds quick and easy. But there was so much back-and-forth with the tenant that Ms. McCarty became a household name in our home. 

Even after we were able to change the locks and take possession, I arrived the next day to a surprise. All four burners on the gas stove were cranked on to heat the home.

And there was a car in the garage!

One of Ms. McCarty’s kids was still crashing at the home. A couple texts to her and locking up the back window was enough to put an end to it.

But they did show up while we were cleaning out the home to grab a few things, including a mattress from the living room.

Let The Rehab Begin

Our first task was to clean out the house. There were a lot of items left behind and the basement was absolutely disgusting and filled with mold.

There were also several cats left behind that I managed to trap with cages and deliver to an animal rescue shelter.

The basement had been finished in the past but nothing was salvageable as you can see in the before/after photos below.

Water was pooling because whoever had finished it had literally tiled over the floor drains. There was no place for water to go!

It quickly became clear that the house was not what we expected. Although it appeared large, and Zillow said it was a 3 bedroom home, it was actually only two.

So we made plans to turn a room off the living room into the third bedroom. But the house was also in worse shape than we had expected.

I decided to give Royce a call, the father of the tenant that moved into Wrecked On Rutherford and helped us get things situated there.

Ultimately, that was a mistake. 

The General Contractor Swap

I would say Royce was a decent handyman, but it quickly became evident that the scope of work for this home was beyond his abilities.

We ended up biting the bullet here, losing some money and a few months of work before realizing we had to make a switch.

Luckily, I had worked with another individual on a small tile job and he’d been great.

Although Charles was hesitant to come into a project behind someone else’s already started work, it ended up going quite well.

We did a lot to the home, including adding the third bedroom as well as a (small) second full bathroom on the main level.

We also had to put a new roof on the house which was unexpected. 

But we pressed on, and by July we were wrapping things up and getting ready to move our tenant in.

Placing Our Tenant & Appraisal

We had already lined up a tenant well in advance of the renovation being done. 

They had stopped by the open house I held for The First Buy Bungalow, loved our work, but wanted something slightly different.

They patiently waited for us to finish the house and even checked it out during the renovation. So moving them in by August 1st was quick and easy.

That said, it was a full 7 months since we took possession and 9 months since the initial winning bid was placed at auction.

It was a journey!

And it was another 3 months after that until we finally had our cash out refinance money in hand. 

As mentioned at the beginning, the home appraised for $120,000 which left just $18,000 in the deal. By no means a home run, but it was a win. 

Here’s a look at some before and after photos:

The McCarty House Today

We still have our same initial tenants in The McCarty House today. We started them at $1,100/mo and have not been very aggressive about raising the rent.

Today they are paying $1,225 and we plan to bump that to $1,275 here when the lease comes up for renewal at the end of July.

I expect they will renew which will mean they’re going on their fifth year with us!

Until recently, we have not had to do all that much to the home.

But we got slapped with a notice that the house was not registered as a rental with the city not long ago. So we’ve been working through our city safety and lead inspections to get it certified.

We are almost through that process and we’ve spent about $4,000 doing it.

Given the home is pretty nice, I’d bet we could fetch about $1,500/mo for it today. While we’re well below market right now I’m the type where I’d rather avoid doing a turnover.

We’ll likely be increasing rent $50/year going forward in an attempt to get closer to market rate.

Overall though, the home has been extremely consistent for us. Beyond that, I’d peg its value somewhere around $160,000 today.

Seeing as we’re still carrying $83,000 on the mortgage, we have nearly $80,000 in equity in the home.

I fully expect this house to continue being a consistent performer for us going forward, both in terms of cash flow and appreciation.

I wouldn’t be surprised if it doubles in value over the next 10 years. Let’s hope I can hold on to it that long!