Shipyard Flashbacks

By Richard Balch

It has been a month since I closed on the house next to my office building. Several weeks ago I wrote an initial blog on the discovery and acquisition of this investment property. I think as a Financial Planner it may be a good idea to share my experiences on developing residential rental income from a small home. I want to continue on with this saga from after I closed on the property on 11/30 and the realtor just handed me the keys. We were now about to ceremoniously enter 1222 S Ridge Road which will eventually be another rental portfolio property.

Upon opening the door what I first discovered was the previous owners did not really empty out the home. It was a mess. There were sofas, chairs, tables, boxes of stuff, a bike, trash, and even rotten food in the freezer. I had the realtor with me when I first entered and noticed the horror on his face as we surveyed the place. Being a patient man, I requested if his firm could supply a dumpster so that my wife and I could clean out this place. After talking with his boss they agreed to do that in light of the situation and to cover that cost. The realtor followed through and I want to put in a good word that it was Dallaire Realty that helped me out with this problem which I greatly appreciated.

My wife and I threw out a lot of stuff and in no time the dumpster was full. I did find a box of 2019 business tax paperwork of which I called the former occupants on and they came and got that. They seemed to ignore the other mess left there. Digging in an alcove my wife found about 20 vinyl LPs never opened of 1980’s rock stars like Madonna, Police, Cars, etc. We sold that to a neighbor who collects those. Otherwise everything else went to the dump.

I also hired a home inspector. He cost $400 and I would say he is worth every penny. During the price negotiation I had to waive the home inspection to save on the $25K lower price I requested. The home inspector walked me through every nook and cranny in the home and I took copious notes and learned many code related violations in my new purchase. I was mostly concerned about the basement foundation and potential for flooding. After noting the sump pump did not work he checked the cracks in the block foundation and determined it was still in good condition so I was greatly relieved. He spent four hours inspecting the home and took many pictures. He gave me the report the next day and it was thick.

Now I come to the part of the shipyard flashback. About 25 years ago I was an engineering officer onboard USS KLAKRING. We had just completed a 6-month deployment to the Mediterranean and after a 30-day stand down period we immediately had a thorough inspection called INSURV which is a US Congressionally mandated ship examination for readiness. We had a slew of inspectors rummage around the ship testing every piece of equipment and identifying deficiencies. I even got to watch them light off the Countermeasure Washdown system – a ship-wide sprinkler system used for protecting it in a chemical, biological, radiological environment. After the weeklong stressful event we had a endless list of discrepancies that we could immediately assign work to since we were to go to a shipyard and into drydock.

When a ship goes into drydock it is a completed with very careful precision. The ship’s captain actually turns over the helm to the dockmaster as USS KLARING crossed the sill and slowly edged her way into the thin slip. Divers carefully set the blocks beneath the keel and then the drydock rises slowly emptying out all the water. This last several hours. Eventually the entire ship is out of the water and you get to see things you have never seen before beneath the hull’s waterline such as the brass propeller, shaft, rudder, struts, fins stabilizers, auxiliary propulsion units, and sonar dome. The gangplank is the laid across the ship and the drydock and a throng of contractors march aboard the ship and start tearing everything apart. It becomes chaos. In the back of your mind you know the ship must be operational in 60-days so it is nerve-wracking to observe all the equipment strewn about.

So with the rental I needed to get a new roof and gutters, install a new furnace along with a humidifier system, reroute the furnace exhaust system since the chimney would be removed, upgrade the electrical from 60A to 100A, fix a broken valve for water discharge on the house exterior, and clean out the ventilation ducting since it was extremely dirty. I got this all done in a week using several contractors. Cost for this work was about $15K. This now leaves me with $9.6K left on my savings on the price reduction. To add to the mess I personally removed all my baseboards and I am looking to take down the kitchen and bathroom cabinets. In the back of my mind I must have this house rented this summer.

I took care of about 20% of my discrepancies in my home inspection report so far. Now there will be much smaller and more time consuming projects my wife and I will tackle in the winter months ahead. I cashed in all my frequent flyer points from my business and personal credit cards and got $1600 of Home Depot gift cards. That may end up being a nice cost savings. We purchased a lot of paint and painted the ceilings and bedrooms and dining/family room. Now we need to paint the trim. The next three major projects on my list include refinishing the wooden floors in the house, remodeling the kitchen, and remodeling the bathroom. My wife and I are already debating about what needs to be done thus introducing the infamous “mission creep”. I will provide another update later along with any other navy flashbacks I have in this adventure. I will keep the cost tally in place also and see if this was a good decision or a money pit...

Richard A Balch, CFP, CLU, RICP

Woodmen Financial Resources

1234 S Ridge Road

Green Bay, WI 54304

1-920-499-8833 Ext 110

[email protected]