In my past articles, I mentioned a couple of times about my real estate deal, and here I am to share further details about it.
My journey with real estate started last year when I sold my condo in Cluj-Napoca, Romania, to buy something different in Oradea, Romania.
My initial plan was to buy a house with such dimensions, so I can transform it by building another floor and dividing the ground floor into four condos of about 34 sqm+.
Below are the requirements I had:
- up to 800 m by walk from the city centre of Oradea
- rectangular form
- has the possibility to build another floor on the top
- less than 45k EUR
- The buying process took me about two months and a half, and I’ve seen more than 35 properties.
After 2.5 months I bought a 71sqm apartment in a common yard with a 25 sqm basement. Being in a shared yard it also has a private terrace of about 30sqm.
The listing price was 45k EUR and the person who sold it was already working in Germany and wanted to sell the house fast.
The first negotiation was 42.5k EUR with 70% credit, but I ended up buying it for 40k EUR in cash.
Here are some pictures of the house the apartment looked like when I bought it:
Before I bought the house, I had it inspected by an architect to be sure my final project can be implemented.
Right after I bought it, we started the paperwork to get the construction authorisation. But being in the city centre area, the requirements were much above what we were expecting.
Oradea had been growing very fast in the past five years, and construction regulations are changing from year to year.
After 3.5 months we finally got a final answer from the city council, and they would approve the construction if I can make room for parking spaces in the common yard for all the four condos I am creating.
Unfortunately, that was a condition we could not make it happen because there was not enough room in the yard and they would not allow us to rent public parking spaces on the street as other developers did before.
So, I had two options: (1) to negotiate with the city council a different way which from my understanding could take at least two years to land on a conclusion which would not guarantee me a definite answer; (2) to re-think my options and get the most out of my deal.
I chose to renovate the apartment and list it for sale.
Being in a new city and had few connections, the only way to choose a contractor for repairs was to meet with each one of them.
So, I started to search on the internet and booked three days in a time frame of 2 weeks about 13 meetings.
I made my choice based on (1) interest shown, (2) guts-feeling, (3) price, (4) time.
The interest shown helped me enormously because I could cross out easy the ones that just come, said it is possible and started to discuss the price.
I had developers that come and went down to the basement, up to the attic and inspected every room. Those were shortlisted.
Finally, I chose one that was willing to help me buy the materials and was interested enough to finish the work well and fast.
Now, once it is done, I could say that I made a brilliant choice. He even supersized me by how clean he and the team left the place after all the work. It was like there wasn’t any construction work.
Here is a picture of the new front and you can see a virtual tour of the house here. Apart from what you see in the virtual tour, I’ve changed the kitchen furniture with IKEA and got rid of all old furniture.
Virtual tour: http://fario.ro/vr/bradului
The renovations took about five weeks, and the cost was 2.8k EUR. Based on research and talks with real estate agencies, I listed the apartment for 57k EUR.
It stayed on sale for two months while I had a couple of interested buyers, but with one of them, we were almost closing. He changed his mind over a weekend. I have never heard from him afterwards.
After a month of the two months, the apartment was on the market; I listed it for office rent too.
I ended up renting it for 400 EUR/month starting from August/September.
Once I rent it out, I’ve unlisted it from selling.
The new plan
I forced myself to think ways to squeeze the most out of place and because it has the possibility to build another floor on the top I acted on it. I knew the city council wouldn’t allow me to create multiple apartments with a different door. But they would not ask for parking spaces if the 1st floor would be connected with the ground floor as it would still be only one apartment.
Now, the idea is to build a 450-500 EUR apartment for rent on the top floor. Yesterday we submitted the first papers to the city council after consultation and on Thursday we get the first official opinion.
The downside is that the whole process till in use will take about nine months, seven months for approvals and two months the execution. The positive side is that in all that time I will check-in 400 EUR/month.
A proper estimation of the costs I will only have next month once a team inspects the foundation and comes with the best solutions.
Below is a version we proposed to the city council:
Here is a floor plan (in progress) of the top floor:
It can also be office space, but the final decision is to be taken before construction begins.
Here are some lessons I’ve learned from my first real estate deal:
- If you buy a piece of real estate to do construction rather than renovations you should do two things: (1) check it with different architects or city planners that what you want to do is going to be approved and (2) double or even triple the amount of time you expect it to generate cash-flow.
- Start a new notebook and be descriptive with every detail you do on the project from numbers and ideas to stakeholders.
- Try to form a team. Think and take notes about every person you work with on the project. Keep the good ones and get rid of the rest; you will need them for the next project.
- If you have a full-time job, buy real estate that is located the max 1h drive of your residence. If the property is ready to rent, you may skip this.
- If you have the cash negotiate hard.
- Define your search before going out there. Be specific about what you want from the property and narrow the search.
- Usually, the renovations costs are 50-100% more than what people say.
- On the 2nd visit (if not on the first) before buying check the apartment with another person too, it can be your wife or a friend, but the fact that another pair of eyes see it may help you.
The article may have another part but that will be once I have a bigger update on the top floor.
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