How We Rehabbed A Tax Auction House Rental House #7

We bought rental house number 7 at the tax auction back at the end of August. This house is a 4 bedroom 1.5 bath (the half bath is in the laundry room off the kitchen, Woo! main floor laundry!). It has a 2 car detached garage and a full basement. I’m not sure whether we can legally call it a 4 bedroom for an appraisal / resell because to get to the fourth bedroom you have to walk through the 3rd bedroom.  But it has the space and that is the main concern!

(Note The original version of this article was posted on December 4th, 2021.  My hosting service reset my website to a backup from October and this article was lost. This reset also deleted all of my WP-Backup files.  The first 1/4 was preserved from my mailing list campaign, however I had to rebuild the rest of the article to the best of my abilities.)

The Tax Auction:

The tax auction used to be in person with each parcel being bid on in order.  Parcel 1 gets bid on, the winner gets the parcel, then parcel 2 starts, and so on throughout the list.  Now our county does the tax auction online, through a 3rd party seller.  With the online auction all parcels are open to bid for the entirety of the day, with all parcels ending at the exact same second.  This is hell.  We originally had our eyes set on 4 separate properties. With 30 minutes remaining in the auction only 1 was left.  I was scanning through current prices on the list and came across this house at around $8,000. It seemed like a good deal and Mrs. C. agreed to go drive by it while I watched the auction.

With about 5 minutes left in the auction she called me and told me it looked like something we could do and we agreed we could go up to $20,000.  The other property we were looking at ended up exceeding our max bid in the final minutes by several thousand dollars.  We ended up winning this house with a bid of $18,000. On top of the winning bid we also have to pay an $1,800 10% “Buyers Premium” to the 3rd party tax sale company, $890.43 for the most recent tax bill, and $55 in administrative fees, for a total initial purchase cost of $20,745.43

This house is in the city of Benton Harbor and is our 2nd rental in the city limits, with the majority of our rentals in the surrounding Benton Township and one in neighboring St. Joseph township.  This house is massive! I love big old houses. Originally our intent with this house was to rent it to a family friend, however she had a lot going on in her life and did not feel comfortable committing to a larger rental payment at this time.

The next morning we went over to the house and although we stayed optimistic, we realized we took on a bigger project than we intended to.  The windows and doors were boarded up and we could not assess the house the night before.  This place was trashed.  It had decades of deferred maintenance, smelled atrocious (and I’ve worked on septic tanks!) and was filled with trash.  We also had an initial time crunch because I had to travel for a nuclear contracting job in 2 days.  We got a 30 yard dumpster delivered on Saturday and I filled it the same day.  I needed to get the bulk of the trash out so Mrs. C. could start work while I was gone.

My friend Ron who runs a septic and portable toilet business dropped off a toilet for us and once he stepped out of his truck said “You guys are CRAZY!”

Inital Walkthrough video:

In total we spend THREE MONTHS and $25,000 on the rehab of this house. Rough cost breakdown:

  • Dumpsters $1600
  • Paint $1500
  • Electrical $1500
  • Roofs: $8200
  • Drywall: $800
  • Plumbing: $1,100
  • Kitchen: $800
  • Permits: $150
  • Windows: $1,100
  • Flooring: $1,800
  • Water Heater: $450
  • Structural: $250
  • Safety: $250
  • Heat: $5,000
  • Misc: $200
  • Trim: $500
  • Siding: $100

So What did we have to do?

Clear out Junk/Carpets (basement too):

I filled over 50 yards of dumpsters with the trash that was in house, the basement, and the garage.  There was also a significant amount of trash in the yard.  As I mentioned earlier the first 30 yards of dumpster was a sprint when we first go the house because I had to go to Florida for work. Having the house cleared out of trash allowed Mrs. C. to get to work on painting and other activities.

Replace Roof:

There was some fairly obvious water infiltration and while I was in Florida Mrs. C. determined that the roof needed to be replaced.  The first quote we got for the roof was for around $16K if my memory serves me right.  A family friend of ours does roofing and offered to do the tear off, but did not want to reshingle it.  For the large portion of the roof with us doing the tear off the roofing company charged us $3,600.

When I got home the tear off was complete and the redecking was in progress. It turns out there were 4 layers of shingles on the house, including original cedar shake.  That’s a lot of weight! I assisted with some of the redecking and I moved most of the shingles from the yard into the dumpsters.   We also reframed the peak of the house. The center of the roof was originally a flat roof section.

Once the decking was complete the roofing company came out and had it shingled before noon.  Those guys were quick! I then replaced the roofing over the 2 bay windows.

Replace windows (and more roof):

We decided to have the window replaced in one of the upstairs bedrooms.  The roof sagged over this window a bit and it was a flat roof so there were some concerns here, but we weren’t seeing any leaks in the house so that was good.  We hired a couple guys off of FB marketplace to replace the window (mistake #1).  They showed up and the main guy seemed really confident and they got started and brought a window to replace the current one with.  The next day the main guy didn’t show up and guy #2 showed up with a new helper.  While working on removing the window they discovered that the roof trusses above the window were completely rotted away, and were very damp.  The roof trusses would need to be replaced and the flat roof redone, but fear not, they are roofers too and they can do it today for $500.

Yeah, that should have been a red flag, but they said they could solve my problem and it was a good deal.  So they tear off the roof and find that there is another flat roof under the flat roof and it is completely water logged.  They got the thing tore off, got the trusses sistered up and then redecked the flat roof. They did a torch down roofing product and finished up late at night.

Well…About a week later it rained and I went into that room and it was soaked.  I went up on the roof and it appeared their seams were letting up.  I tried to retorch those down, and I also added leak stopper.  This did not fix the problem.

Honestly, for the amount of work they did I still got a good deal, even though I did not end up with the end product I was searching for, a roof that worked.  A truly flat roof is not desirable and obviously this roof has had issues for a long time.

Replace Roof Again!

We tried to get a roofing company out to see what they could do for us, but no luck, everyone was booked up and honestly its a small job and more hassle than its worth for most companies.  The flat roof was roughly 12′ X 16′.

I decided to eliminate the flat roof and build a pitched roof over it.  I used a 2 X 12 I had for the ridge and framed the 2X4 supports.  Then decked it, did 100% Ice and Water shield and 30# felt, then shingled it.  This was my first time framing a roof.


Outside of the area where I built this roof was a big siding issue. The window the FB Marketplace guys replaced the old one with was taller, but not as wide as the last window.  I patched siding in here and also fixed multiple broken pieces of siding around the house.  I ripped out 2 overhangs over the side door and the back door that were extremely rotten.  I then had to put up OSB over the holes and side over these locations.  Unfortunately the siding was done in 2 separate batches on the sides of the overhand on the side of the house and I could not get the siding to match.

I did learn a lot while doing the siding and going forward I can match siding a lot better.  I was doing it all by hand to begin with and tore up my fingers. I found out there is an $8 tool that pulls the clip of the siding down to make it easy to install and remove. Without this tool your fingers get pinched and cut installing and removing the siding. I also power washed the siding, which was miserable in 30 degree weather with strong winds on a ladder.


We hired a local contractor to do the drywall. He is really good at what he does, but the timing was difficult because he has a full time job and the house didn’t have electricity or heat, so most days he could only work on it for an hour or 2 due to losing light and the mud took forever to dry because of no heat.  I ended up doing some drywall as well, mainly on my screw ups that added new damage. I re drywalled the ceiling under that flat roof and I did a bulkhead where I ended up having a water leak.


We repainted the entire house. Every room, walls and ceiling. We bought kitchen cabinets and painted those as well. This is the most painting I think I’ve ever done. I love how freshly painted ceilings look.  As much of a pain as it is to do, I will most likely continue this going forward.


I don’t like doing carpet in rentals because it is destroyed easily.  I person spills a drink or drops an iron and the carpet is shot.  We got a great deal on commercial carpet tiles for 75 cents a sq. ft and used those for all the bedrooms.  We did a thick sticky back tile for the kitchen and the bathroom.  I HATED these.  Normal sticky back tiles are OK, but these were so much harder to work with.  This is mostly on me for not buying the right tools, I used a stanley knife to cut them, whereas there are special cutters made for these. Anyways they are a lot more durable than typical sticky back tiles.

I love to save hardwood floors, but the hardwood floors in this house were really beyond saving.  They had substantial wear and tons of screws, nails, and staples in them.  We removed as much hardware as we could, cleaned them really well, and painted them with black floor paint.  We then did 2 coats of polyurethane over the paint to protect it.

We did real ceramic tiles in the laundry room. This was our first time laying real tiles and it turned out pretty good.  Mrs. C. did 90% of laying the tile and I did the cuts.  This was a square room and I was able to get away with using an angle grinder for the cuts instead of a wet saw.  The floor was close to level, but not 100% in 2 spots, which created some difficulties.  This is why we went with the sticky back tiles in the kitchen, because that floor is not level either and it is too big of a space to fight with.

We got a TON of ceramic tile on a stupid good sale last year.  A tile company about an hour away does a parking lot sale every year, eventually they drop the price per truck load/ vanload down to $100.  We ended up doing 5 full van loads with all the seats out.  My van was crying from the weight lol. Anyways the retail price on the tile we got was around $15,000. We then sold some travertine back splash for $350, which was a killer deal, and now only have $150 into about $14,000 worth of tile.

Electrical updates:

The Electricity was so frustrating. When we got the house we noticed that the previous occupants had been stealing electricity. They had spliced into the wire coming from the road.  We notified AEP of this and they said they would fix it for us.  I cam by the day they were going to fix it and noticed the power wasn’t on, then came back and saw they had completely removed the wire going to the house.

We then found out that because the meter riser was subpar, they would not reconnect and we needed this replaced. A family friend did this for us. He replaced the meter, the riser, the wires, and replaced the breaker box.

We then had to get this inspected and the inspector was just supposed to inspect what was outside the house.  He insisted on coming inside.  He found a couple things that needed work on the outside, but inside in the basement he found another 6 or 7 things.  I thought I addressed everything, but it still wasn’t good enough. He visited 3 times before it was finally approved. And he only worked in out city 2 days a week, so there was a big delay between each visit.

Once we had approval smooth sailing right? Well no.  Once we finally got power to the house we started turning on lights and blew a breaker.  We lost power to most of the house.  I ended up spending a day troubleshooting and was able to find and fix all the problems.  Yay! Power!

Getting water:

The water was also a headache.  We asked the water department to give us a meter to build around, but they would not. They wouldn’t even tell me how long the meter they use is.  This was frustrating because the previous occupants had also been steeling water and the pipes had froze at one point. I needed to replace all the plumbing in the house and I didn’t have a meter to work off of.  I guesstimated and ended up being close enough. The guy from the city that came out to install the meter found that I didn’t have the right connectors and he ran to the store and got them for me.  We got it hooked up and got water after over a month without water to the house.

I replaced 75%+ of the water lines with CPVC and had a few adventures with leaks while working towards getting water to each fixture. I added several shutoffs throughout the house to make servicing easier in the future.  I also replaced the old water heater with a new one.  Most plumbing fixtures were replaced. We replaced 2 toilets and 2 sinks.

Replace furnace:

Originally it looked like we could save the furnace that came with the house. We had our HVAC company give it a look and start it up and we had heat.  Everything was good…but the next day it was cold.  We had them come back out and what was happening was the furnace was shutting off from over heating. They added ventilation to it, but the issue persisted.  The furnace was 30ish years old and we ended up replacing it. The last thing we want is the furnace intermittently going out on a tenant.  We got a 95% efficiency furnace. In theory I have a $200 rebate check coming from the utility.

Replace more windows:

We had 3 picture windows that were broken as well as 2 smaller windows in the kitchen.  We replaced these with plexiglass panels.  We also did replace one kitchen window in full with a like sized window.  I like plexiglass because it is stronger than glass, easier to work with and is less dangerous if/when broken.

Jack up the flooring:

The floor sagged in one spot in the main floor.  The previous occupants had put down self leveling compound to “fix it”.  We moved this and addressed the main problem.  The horizontal beams under the house that support the flooring at that spot had sagged down because the support board for them on one end had rotted away.  We added 2 jacks and jacked the floor up over 6 weeks to much closer to level. It also feels extremely sturdy now instead of saggy.

Paint exterior trim:

This was not fun.  I need a taller ladder. This was also not safe the way I did this and I should have stopped.  The house does look much better for it though. My ladder really isn’t tall enough. I had it fully extended and at too close of an angle, while too high on it. I won’t be doing that again.  The old trim was poorly painted on and was a faded red color.  It looked terrible.  I painted the trim black and it looks much better now.

Tree Work

This house had been neglected for years and that goes for the landscaping as well.  A large tree in the backyard had branches touching the house, and there were several trees in the neighboring side yard growing right next to the house.  The house is built right on the property line and a fence extends on both sides of the house.  The adjoining side lot is owned by the city. Ideally I will be able to buy it at some point.  Anyways, there were a ton of trees growing next to the house and I cut all of these down and removed the wood. I spent a total of 2 full days working on tree trimming.

Garage roof patch, structural, windows:

The garage roof had a hole in it. I ripped back the shingles, patched the wood decking, and tied new shingles into it.  I’ve been in there during a heavy rain since and my patch did well. It isn’t pretty because the shingle color is off, but it works.

The back side of the garage had fallenoff the foundation, most likely hit by a vehicle at some point.  This cost nothing to fix, just time.  I cut out the damaged sill board and then beat the wall back into place with a sledge hammer from the outside.  I then replaced the boards I had cut out, tied it into the 2X4 wall boards, and then attached with anchor bolts to the foundation.

There were also 2 broken windows boarded up on that faced the interior fenced in yard. I removed these and replaced them with storm windows I got for $5 each from Restore.

Did I mention the garage was originally full of trash? It had over 10 yards of trash in it.  It also had a sliding solid wood door that didn’t slide well anymore and closed off 1 side of the garage at a time. I removed this and took it home to my burn pile.


Although we paid cash for this house, we didn’t really pay cash.  We have a home equity line of credit (Heloc) on our house.  For almost a decade we have been paying extra on our house and have now effectively paid it off.  We have a heloc for $200,000 on our house.  (Originally it was $50,000, then we modified to $135,000 as we paid off more of the house, and again last month to $200,000 to take advantage of the increase in property values.) We have an interest only heloc of 3.5%.

This means on the original $21,000 investment our carrying cost was only $61.25 per month.  Once we finished the house and had $45,000 into it our carrying cost only increased to $131.25 per month.  At 6 months of ownership, in February 2022, we will do a cash out refinance to take the money off of our heloc and put it onto its own loan. This will free up space in our Heloc for the next deal.

We can do a cash out refinance for 75% of the appraised value on a 15 year loan.  I want to get as much real estate on fixed loans as possible now while money is cheap.  I am anticipating an appraisal of $80,000, but let’s say it comes in low at only $65,000.  (By the way if you can get assets for $65,000 that generate $950 a month in income, back the truck up!).

At $65,000 appraisal we can get a loan for $48,750.  $45,000 will pay back the entirety of our Heloc, $3,000 will pay for our closing costs, and we will put $750 in our pocket. We will have $0 in the house! This is the power of the BRRRR method (Buy Rehab Rent Refinance Repeat).  If it appraises at $80,000 we can get a $60,000 loan.  $45,000 will pay back our investment, $3,000 for closing costs and we will put $12,000 in our pocket.  We would use this excess cash towards buying more real estate.

I did find out when buying this house from the tax auction that the new tax auction company accepts credit cards. Going forward I may be able to buy a house with a credit card.  I could apply for a credit card right before the auction and get a $40,000 limit credit card with a 0% interest 12 month teaser rate.  It would then cost me absolutely nothing to finance the house for the first 6 months before doing a refinance AND I would not use my heloc space, which could go to another property.


final walkthrough video:

We rented this house out to a previous tenant of ours for $950 a month.  With the current rental price and all the work we did to this house, I am estimating that it is worth $80,000 today.  Since we spent a total of roughly $45,000 on the house we added $35,000 of sweat equity to it.

I;m glad that we took this house, if for nothing else to expand our comfort zone.  This house is in an area that we normally would not invest in due to perceived crime activity.  We only went for it because it would have been a good fit for our family friend.  After working on this house for 3 months we got a lot more comfortable with this area. Every person I interacted with treated us well.  We had people offering to help us. I left thousands of dollars worth of tools and material in that house every night and there were no window coverings. Nothing was ever taken. I even left tools in the garage and nothing disapeared.  Our perception of this neighborhood was wrong.  I think 20 years ago that perception would have been closer to correct, but the people who lived in that area then that caused trouble either grew up or went to jail.  Maybe all the neighbors we interacted with were just happy to see someone investing in the community, as there are several abandoned houses in the area.

I am also surprised by how many people are desperately looking for houses to rent.  I had dozens of people stop by and ask us if the house was for rent and how soon it would be ready.  This is not on a main drag. I had 1 person ask about buying it, and dozens ask about renting it.  There is a major demand for housing in Benton Harbor, which I’ve foreseen coming for years. The population in Benton Harbor had dropped for half a century and has stabilized over the last 15 years.  Meanwhile the county has torn down hundreds of houses with a blight reduction program, the airport expanded tearing down hundreds of houses, and they closed a trailer park eliminating over 50 homes.  Mix that with people from surrounding areas willing to give Benton Harbor a chance because housing is less expensive than the surrounding areas and you have a housing shortage.

I’m thrilled that this house is done.  I enjoy taking a house that has been neglected and abandoned and turning it into a home again. I also love adding more homes to help with the housing shortage we currently have in our area, however I could love it just as much if I spent 1 month on it instead of 3 months.  I am exhausted, Mrs. C. is exhausted, and the kids are exhausted. This was a marathon house to work on.  While I am glad it is done and it all worked out, I feel I still bit off more than I want to chew.  Going forward I will be much more thorough in choosing the deals I go after, and most likely tax auction properties that I can’t see the inside off will not make the cut.

What do you think of this house and our rehab?


John C. started Action Economics in 2013 as a way to gain more knowledge on personal financial planning and to share that knowledge with others. Action Economics focuses on paying off the house, reducing taxes, and building wealth. John is the author of the book For My Children's Children: A Practical Guide For Building Generational Wealth.

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