Brett Stomps | Windermere

Investing in Klickitat, WA

How I went from selling my cars, changing jobs, to buying my first rental property. Follow along with the lessons learned along the way.
Table of Contents
Table of Contents

Background Context

Starting October 2021, I bought my first investment in Klickitat, WA.

You see, back in 2017, I was just about to graduate college with my Bachelors of Information Technology Management from Oregon Institute of Technology. I was working at an automotive performance shop as their website manager for an e-commerce store called RalliTEK.com. Employees there didn’t make much and we all spent way too much money on our cars. I was on a path of accumulating depreciating assets and had a degree I wasn’t happy with. Ah, those were the days.

So, fast forward to March of 2020. I had left my job-job in 2018, and moved to the Columbia Gorge, a place I had been visiting family for all my life. I moved in to what was my grand grandparent’s home and I was basically unemployed, awaiting to start my real estate career.

As COVID-19 hit the world, I watched as stock markets plummeted and my parents lost nearly a 1/4 of their retirement over night, taking with it the money to build their retirement home. I was all too convinced that understanding real estate at a professional level was required if I wanted to survive my own retirement doomsday.

This article is going to be a deep dive into my experience of:

  • Selling & Switching Assets
  • Reducing Expenses
  • Learning about how real estate works
  • Acquiring my first investment
  • Remodeling the property
  • Renting it out
  • My experiences investing in Klickitat, WA
  • The Return on Investment
  • Personal experiences I learned.

So, let’s begin!

Selling and Switching Assets

Step one was quitting my job and selling my car(s) which were not returning me a positive investment. This is of course optional depending on the kind of income you make, but as a fresh out of college grad at the time, I was basically at the bottom financially. My cars were my largest assets, aside from a small nest egg stored up in stock funds.

RIP Race Car.

Reducing Expenses

I see it all the time with first time home buyers. People living outside their means and complaining about not being able to afford housing. Yes, housing is difficult to afford, it should be easier, but do you need the new car and all the subscriptions?

Downgrade, slash, remove them, etc.

Find Cheaper Living Environments

It was about when I quit my job and sold my depreciating hobby cars in 2018-2020 that I found a cheaper living environment. Ironically, this was in White Salmon, WA, a place considered to be expensive (and it is).

For those of you who know me on a personal level, I moved into a family rental at a reduced rate. I understand not everyone has this luxury, but the point was to reduce my expenses and begin to save for my investment.

If investing is your #1 goal, you will find a way to cut any dollar out of your expenses. Even if that meant moving to a new neighborhood all together. For me, it is a nice house, but I promise you, I would have moved into a shed if I needed to.

In today’s economy, if you are broke, and don’t make a lot of money, it takes forever to save enough to buy a home. It’s hard enough to chase appreciation in the Gorge. It’s usually easier to cut things out of your life than it is to work harder and find more money.

Once you get your first rental going, it gets easier and easier (generally). Until then, don’t try and toil so much that you hate your life. Saving is a lifestyle that needs to be sustainable mentally.

Learn About Real Estate

From the time I sold my car in 2018, and obtained my license in March of 2020 (coincidentally), I spent about 2 years learning and reading all that I could find on Real Estate. I had found a flexible schedule doing landscaping and yard maintenance which allowed me to listen to podcasts and books during my working day.

Podcasts such as biggerpockets.com were very popular for me during this time, but I later felt they were repetitive. I still recommend them.

Finding the Investment

Fast forwarding to June of 2021, I had one heck of a real estate year under my belt. The stock market had recovered and was hot. The housing market was on warp drive. Low interest rates super heated housing prices and the market was full of buyers trying to get a slice of the American dream (especially in the Gorge).

I received a call one day from a retired agent in my office. “Hey Brett, I have a friend of mine needing to sell his house in Klickitat, want the job?”. As any new agent would say, “Uh, yeah, thank you!”

I was being mentored at the time and my mentor says, “Why don’t you just buy that place?”. Hmm – I hadn’t thought about investing in Klickitat – did I have enough money? I wanted to see it first. So, I met with the seller a few days later and disclosed my interest in the property. I went home and ran a Comparative Market Analysis (CMA) for the seller and he told me what he wanted for the property given this info.

Related: Affording a Home in the Columbia Gorge (with locations)

Making the Decision

The market was hot after all and I had been saving my money for just this occasion. But, investing in Klickitat? I was a bit unsure. I did not know the place that well. There’s a whole post on, “Affording a Home in the Columbia Gorge” which goes into where to find affordable homes that make great investments. I knew Klickitat was one of the cheapest areas of the Gorge and home hardly came up in this area.

Klickitat has had a reputation for drugs, but not really violence. I had visited a few times, mostly to float the river. It was really cheap all things considered. I was growing more and more interested in investing as my mind expanded around the idea.

If you don’t have an agent yet, I highly recommend it, as finding opportunities off market is something that can happen if you are putting in the time with your agent. Don’t expect to just email or call them once and receive 10/10 service.

There are so many buyers in the market (even still), you have to do yourself a favor and stay connected with your agent and get onboarded with them. In WA, that includes signing a buyer agency agreement (required as of 1/1/24).

Analyzing the Property (Rents)

So, after seeing the property, I ran the numbers. I hopped onto Zillow.com and looked at what the rental market was like. I also used Facebook marketplace. $1400-$2800 for varying quality and varying locations throughout the gorge. The next steps were to:

  1. Run a proforma with a rental amount I felt I could obtain.
  2. Obtain a loan for the remainder of the purchase.

Proforma

It was a 1925 home. 2 Bedrooms, 1 bath. 944 Sq/ft. The seller had put on a new roof, and the previous owner before him had raised the foundation by 1 cinder block after the 1996 flood of the Klickitat River. The seller wanted $125,000 after I presented him my CMA. Which was fair and in line with what the comparables showed.

I told the seller I would get back to them after I ran some numbers (my proforma). I used the BiggerPockets calculator for this as I was heavily involved with their content at the time.

You can download my proforma here: Klickitat Rental Proforma

I ran my numbers conservatively knowing this was a learning process. My goal for this rental was to break even with my mortgage ($713/mo). If someone was paying for me to have equity, I was okay with this. Other investors may want their money to return them more for their efforts. To me, equity was enough on rental #1.

Obtaining a Loan

This property could have sold conventionally. Except, I had not been a realtor long enough. Conventional lenders generally want to see a 2 year work history (even more so for solopreneurs). I didn’t have this with my new businesses. I had to find money a different way. So, I reached out to a relative for a 70K loan.

Now, as you can see here already, I had some things going for me:

1) I had a place to live in White Salmon below market rent.
2) I had a relative willing to loan $70,000 based on our relationship.

I understand this same purchase would be harder if you had zero connections. I know of people who have rentals under $700/mo in the Columbia Gorge and if you have held a job for more than 2 years, chances are you can obtain a mortgage for $70,000.

I approached my relative with my proforma and an interest rate that I had in mind (4% when the market was 2.5%). Had it been any more money, I don’t think I could have gotten this, but 70K in the grand scheme of real estate is very cheap. They are life long investors in the Gorge too, so they were bought in with the idea of investing in Klickitat.

Writing the Offer

After I ran the numbers using the bigger pockets calculator and had my loan (verbally secured), I was bought in. It was go time. I gave the listing over to my designated broker to keep everything as legal as possible, and I wrote an offer at the seller’s asking price as we had discussed. I added in all of the standard contingencies – including a home inspection contingency.

I put 55K of my own cash down, and obtained a loan for 70K for the 125K purchase price. I had $50,000 left in savings. I was able to waive the entire commission of $6,250 (both sides). This is a policy (perk) of our office – my designed broker also did not ask for a commission. My seller got more money too this way.

Finding this property “off-market” was a major advantage here. The seller and I were both happy.

If you want the assistance of a real estate agent to help you find properties like this, meet with them sooner rather than later. By the time good opportunities come on the market, those who are prepared and onboarded with their agent stand to have the best chances at winning offers.

Home Inspection

Having sold a few homes before this adventure, I knew what good inspection reports looked like and what the the bad ones looked like. This inspection report was great for what one would expect of a 1925 home. You can view the home inspection report here: Klickitat Rental Home Inspection Report. That will give you the details.

If you ever are buying a home and have a bad inspector report, read my article here: Steps to Navigating a Bad Home Inspection Report.

Exterior

Outside was rough, but the least of my concerns. I knew that I needed to get the interior squared away, rented, and then I could come back and finish the outside at a later date.

Here were some notable items (good and bad):

  • Bad – There were several raised flower beds rotting in place.
  • Good, but not great – The home had vinyl siding.
  • Good – 3 decks.
  • Bad – Slanting shop.
  • Good – New roof.
  • Good -Newer foundation.
  • Bad – Chipping eaves along the roof w/ purple trim.
  • Bad – No gutters.
  • Bad – Blown out window.
  • Bad, but not terrible – Dead trees and garbage in the yard.

Interior

The interior was the #1 concern. This was going to be where people lived and spent most of their time. Here is a list of items that came up on the home inspection report for the interior of the home:

  • Good & Bad – Effervescence in the crawlspace.
  • Okay – Post and pier framing brackets needed.
  • Bad – Attic fans not working.
  • Bad, but easy to fix – Smoke alarms not operational.
  • Very bad – Electrical panel 100amp and not 200amp.
  • Very bad – No ground wire in entire home (or GFCI).
  • Very bad – Hot water heat leak + completely rotten flooring.
  • Bad – Slow drain in bathroom tub.
  • Bad – No ventilation in bathroom.
  • Bad – No range hood above stove.
  • Bad – Asbestos flooring throughout the home (several layers of it).
  • Bad – Broken and moldy refrigerator.
  • Bad – Inoperable gas heater (this was the only heat source).
  • Bad – Chipping and peeling paint.

Closing on The Property

I closed the property into an LLC and created a checking account in advance in addition to a credit card for cash back bonuses. Once at home depot, I created a pro account there as well to take advantage of some of the savings through material costs.

I transferred the power, water, and sewer into the name of my new LLC and it’s corresponding bank accounts. I deposited $5,000 to start. I drew money from my stock market funds as I needed more.

In retrospect, I would have felt more comfortable withdrawing all of that money in advance in case the market turned volatile and I came up short financially to finish the project. However, I was able to earn a few thousand dollars with the other $50,000 that was invested in stocks. I would not want to risk these funds again on a second project.

Demolition

I bought a truck for $5,000 and sold it for the same amount after the project was done. But here are some quick photos of the demo that took place. I didn’t do a very good job documenting the entire process, but you get the point.

If you were planning on doing a quick flip, I recommend just having a dumpster delivered.

Renovation

I had no prior experience doing any kind of flipping. This was the crux of this project for me. Not only was I clueless how to do the work, but I did not have tools, nor the time to learn while starting my real estate business. I relied heavily on the work, schedule, and labor of others to push the project forward so I can continue to earn an income at my new job as a Realtor.

I used the home inspection report as a guide but admittedly didn’t have much of a plan. A good friend of mine offered to help for free on his off time to help account for the costs of the project. However, between the two of us having not done a project like this, we opened up the scope of the project up too far. Plus, the demo was just too much fun as we thought of better and better “ideas”…

At the heart of it all, we wanted to create a good product for Klickitat. The project took about 1.5 years to compete. More on that under “Lessons Learned”.

TLDR: Buyer a dumpster, have a plan, move fast.

Electrical

This was the main part of the project. The home had a 100amp electrical panel and no ground wire. Having been in the attic during my due diligence period, I knew there were newspapers and jerry-rigged electrical boxes connecting the home’s electrical system together. It was determined early on that upgrading the home’s electrical to a 200amp system with a ground wire would be the most challenging, but the most necessary upgrade.

Without getting into too much detail, I pulled the permit for the job and started doing it myself. It was easy enough removing the old wires within the walls and getting to a place to start fresh, So that’s what I did.

Upon trying to put it back together however, that was going to be a big “nope”. I hired Coburn Electric to do this job. This was about a $15,000-$20,000 expense, even after my removing of old wires.

Utilities

A part of the reason why I chose to upgrade the electrical was to be able to run a heating system in the home. The home at the time of purchase only had the gas stove for heat and the sellers were using oil heaters in each of the bedrooms. They complained of tripping the breaker a lot.

Now – I was really slow on this project. It was me and a buddy doing the work in our off time and I was just starting a business as I said, so, we ended up of course working on the project into the winter of 2021. It was cold. A neighbor offered to allow us to run an electrical cable over to the house so we could operate a space heater and keep working. Thanks, Jay!

Baseboard heaters were installed as a cost effective way to add heat into each room. An “in-wall” AC unit came with the house in the living room and that is still the only source of cooling in the home.

The previous hot water heater had also leaked, creating a lot of rot in the supply room. So we had to deal with repairing the floor, which included reinforcing the floor joists. Thanks, Ethan!

Final Product

You can view the finished product in the gallery below, but as you can see, we added:

  • New lights
  • Flooring
  • Electrical
  • Fridge
  • New sink in the supply room
  • Hot water heater,
  • Almost a complete remodel in the bathroom
  • Fefurbished the doors.

I will let the photos do most of the talking, but needless to say, this was way more work than I wanted to get into to for a first time flip. My mentor at the time said, “just turn key it”. Once opening the scope of the project up as I did, I often wished that I saved myself the pain, and did just that. Now that it is in the past, I am glad we put value into the home. I do not regret the money spent at all, but only that I saved myself the stress by hiring someone from the start.

Lessons Learned

Lesson #1: Do not try and start a flip when you are starting a business. This was the #1 lesson I had.

Lesson #2: Move as fast as possible. If you are like me and you aren’t good at doing the work, just hire someone. Eat the cost sooner than later. I tried to save myself money, but with such a busy work schedule, I had ended up holding this property for 18 months (more than $12,834 not incl. property taxes). This was way too long.

Lesson #3: There are still affordable areas in the Columbia Gorge. Klickitat is one of them.

Not only was I paying the mortgage, but before I paid for a contractor to finish the project, I was stressed out beyond measure and broke a lot of things trying to “learn”. I was so stressed out it took a massive toll on my ability to preform in my own business – the place where I make money to pay of this project.

Community of Klickitat

The community was by far the most surprising outcome of this whole project. As I just mentioned above, I spent way too much time on this project. 12 months too long. During this time however, I got to learn a lot more about the town of Klickitat. Maybe it was all luck, but I ended up across the street from a long time local.

He had lived there since the 70s, and was currently living in the house he had grown up in. Wild, eh? He owned a few other properties in town including some land. He told me amazing stories of what the town used to be like, and what happened since the mill shut down. He was open to sharing everything he knew about my house and the neighborhood. But it doesn’t end there.

He had offered us over to dinner during one of the Superbowl’s, dropped off extra cookies during Christmas, loaned us several tools, sourced us an original door for the home, burned limbs, helped inside the house for free, taught me several things, and even let me drag an extension cable to my place to run a heater.

The others I met in town were just as nice. I was gifted beers, extra fish, and even one younger gentleman asked if I needed my lawn mowed – to which I paid him for his efforts. Never once, was I robbed or broken into.

Yes – there were some individuals who appeared high on drugs or a bit ragged, but this was their home town and from what I experienced, they minded their own business. I now have such a love for the town of Klickitat. Being that Klickitat does not have cell service, it’s like those who live there still have some manners and live a slower life. I love Klickitat more than ever and my business there has even expanded in terms of my Real Estate transactions.

Marketing the Rental

When the property was ready to list online, I was already one step ahead of most first time landlords. I had forms associated with my Real Estate license. All I needed to do was pay for a background check for $40 and fill out the lease. For most of you who are not licensed, once again, I would recommend biggerpockets.com or taking to a broker to get an idea of what is to come.

Listing the property was easy. I used my DSLR with a wide angle lens to complete this job. However, any high quality wide angle cell phone camera would work. You can also go the extra step and hire a real estate photographer for about $200. All that matters is that you have appealing photos. Renters will be comparing your rental to others online before they come tour.

I posted the rental on Zillow, Facebook Marketplace, and Gorge Classifieds,

The property sat on the market for 3 weeks and I had 28 inquiries (May of 2023). I had 2 applications apply and I choose the applicant with the best credit and rental history (he had owned a home for 15 years and was getting divorced).

Initial Evaluation vs. Reality

This project was a lot harder than I anticipated. Being way out in Klickitat, WA, making trips to Home Depot is a massive pain. Anytime you forgot something you were set back well over 1:30hrs. This, on top of starting a business made it a huge pain for me to make money and put money into the project. Had I been able to buy a home in The Dalles, Bingen, or the town of Husum, I would have been able to complete this project faster.

Another reminder was, do not open the scope up too far. Come into your first flip with a plan well before you close on the property. My buddy and I put this all together on a whim without a plan, thinking it was easy enough and straight forward. This was very wrong, at least for me. There are a lot of little details that go into a project like this and it can be a part time job even delegating the tasks out to professionals.

Conclusion

Would I invest in Klickitat again? 100% Yes.

The end result was basic in my option compared to those who do this kind of thing for a living. However, I am happy with the outcome. The home is in much better condition and it now serves as a nice home in the Klickitat community. The exterior of the property has yet to be improved, but once the property has turned a small profit, the upgrades will be made in a quick, defined fashion.

What is my long term plan? I took a 10 year note on the property to repay it back. As of right now, the plan is to keep it rented and accumulate equity and cash reserves for future repairs. Within 2 or 3 years, look at pulling the equity out and consider using it as a down payment on a new rental.

Disclaimer

The information provided on brettstomps.com is intended to be educational and accurate. However, information on brettstomps.com does not substitute as buyer and seller due diligence when transacting real estate. Buyers and sellers are advised to work directly with a licensed real estate professional, seek additional professional services when applicable, and to inquire at the state, county, and city offices for their due diligence.