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We’ve ended up with a much safer retirement nest egg than we had worried about before quitting our jobs.  Why?  Partly, because just after I left my real job and entered the world of financial freedom, I “bought” myself a side gig.  It was 2011 and real estate was on sale everywhere.  Even crazy, leaky, old, falling apart places with great possibilities to someone just crazy enough to try it.  Like me!

I was reminiscing about this when I was reading a recent blog post by DocG at DiverseFI called Safe Withdrawal Rates: Why We Are Kidding Ourselves.  Check it out.  It’s about how people in the personal finance community are the type who can’t help making money after trying to “stop working”.  It happens.  We are a productive lot.

For me, I just enjoy trying a variety of things and I’ve always had an interest in home design projects and tricking my husband Matt into joining me (translation: he does most of the work and I just dream about it all).  This was one of those dreams.

But because Matt was still working for another couple of years, I actually did a lot of the manual labor.  And I got in pretty deep.  Really deep, as you’ll soon see.

Getting In Deep

I found this house in Lodi.  Yes, that is the town made famous as Stuck In Lodi Again. My first offer was $87,000, nearly the entire asking price.  A great buy for a 3 bedroom 2 bath place in an emerging wine region just up the road from our house.  But we got it for $84,000 because we had cash.  Oh, and probably because during the inspection, we found a major plumbing problem that explained why the main water supply to the house was shut off.  We got it turned on briefly to see water gushing all over the back patio due to a break somewhere unknown.  The house was in foreclosure and they weren’t looking for a buyer who needed a mortgage.

Ok, I’m not Paula Pant and I didn’t know formulas to figure out whether we should invest in this property.  So I started calculating and I thought I could probably rent it for around $1200/month, so a budget of about $36,000 would bring my investment to $120,000.  Subtracting costs for insurance and property taxes, I was thinking this could be something like a 10% return on my investment.

Recently I found a much better way to analyze real estate return.  It was part of a post the Big ERN wrote about your house being an investment.  He has a spreadsheet that calculates the Internal Rate of Return, or IRR.  It’s a really great resource.  Okay, it’s years later now, but I downloaded it to an Excel spreadsheet just to see what it would have shown if I had used it at the time.  Entering the numbers I hoped for — to spend $120,000 — then my IRR would have been 9.7%.  I wasn’t too far off.  Of course, being an engineer, I knew that all projects cost twice as much and take 4 times longer than you plan, but….

That huge investment return motivated me.  Not just that, but most of our investments are in the stock market, whether those are in IRAs or after-tax accounts.  This property could bring diversification and in addition, it would be a hedge against inflation.  That would be great.

My biggest excitement came from the kitchen though.  I have to admit it.  I loved the possibilities of remodeling this kitchen.

While many other people were “underwater” on their homes at that time, we quickly found ourselves under water with every facet of the house.

It started really great though.  I got the water main repaired for only $1200.  That made me feel really smart because I negotiated a $3000 reduction off my original offer when they disclosed that water issue.

But then the plumbers offered to do a free video scoping of the sewer line.  Reason being?  Homes built in the early 50s, following WWII often had this odd material called Orangeburg pipe, which is made from materials a bit like thick cardboard.  Great.  I could begin to hear that “ca-ching” sound for the first of many, many times!

That thread started getting pulled on and the next thing you know our backyard looked like an anthropology excavation site.  And it was shortly after that when we realized we needed to re-plumb the entire house.

This turned into quite an adventure.  Six months, pretty much.  What all happened during this time?

The Police Report

One of the things we learned at the start was that the Lodi Police department gets involved with foreclosures and our property was sited for violations on the makeshift garage electrical work and the gas line to the house, which was gerryrigged in an odd attempt to have a laundry setup in the garage.  The items on the police report forced us to do our work using a building permit.  (Of course we planned to get one, right!)

Three Plumbing Problems, Three Building Permits

What started with a single permit to correct the garage, expanded to three permits by the time we were done.  These were all caused by plumbing.

One story that was funny involves how you don’t have to upgrade any item in on older house, but if you do upgrade it has to be to current code.  Once we started on our third plumber and the new PEX plumbing lines were being routed overhead, we decided to put insulation and sheet rock on the ceilings, rather than keep the old open beam look.

But these beams were 6 inches thick.  Current code required 12 inches of insulation.  We had to choose between no insulation at all or we would have to redo all the beams to make them 12 inches deep.  It seemed ridiculous that it was okay to have no insulation at all, but wrong to put in 6 inches.  Crazy!  So, I chose to have “no insulation”.

What this actually meant was that we had to wait for the inspector to approve our plumbing and then secretly put in the insulation before the sheet rock people arrived.

In order to not delay those workers, we got to do our work on Christmas Eve and Christmas!

The Gas Line Goes Last

It was a cold winter.  This is California, but still, each morning as I opened up the house I would look at the indoor temperature, which was usually around 48 degrees.  It was that cold because we could not hook up the gas line until the end of the final permit.

The reason is that any nailing or other construction might shake things up.  So even though the gas line was one of the first things installed, it was going to be last on the list to complete.  Buuuurrrr!

You Can Buy a Kitchen at IKEA for less than $5000

And it all fits in a little stack.  I loved using IKEA.  They have a great design tool with 3D views and you can click a button to print a parts list with prices.  It was great for planning and fun to use.

I was lucky that there was a 20% off sale going on at the time, if you spent over $5000 on the purchase.  I played around with that design tool, adding an appliance or faucet, until I got over that line.  Then the actual cost ended up being $4700.  Nice!

When it came time to make the purchase, it felt a little strange and exciting to walk up and get in line with people buying lamps and pillows.  I found that contractors and other home flippers usually don’t go the IKEA route.  Why?  Too much labor cost.

But I was getting the labor for free.

Free Labor — Matt Took a Month of Vacation Time Off

Others travel in retirement to exotic vacation spots.  What do we do?  We worked 7 days a week, 10 to 12 hours at a time in that 48 degree chill.

Isn’t it “cool”?

I ended up traveling to our nearest IKEA in Sacramento three different times to correct flaws in a few little items on the parts list.  That place is designed like a maze, perfect for most people in the rat race.  And the kitchen area is in the upstairs back corner, the furthest possible location in the huge store.

But I love IKEA.  Maybe because it rhymes with Idea!

We Got Granite Installed for Less than $1000

Who would have ever guessed we would end up selecting a pricey countertop for a rental?  But one of the guys we hired had a lot of buddies.  He insisted we check into using a friend of his and purchasing granite at the outlet in Sacramento.

That turned out great.  They make slabs with the bull nose already connected.  You can choose left or right hand corners or straight.  I was able to do the kitchen with just two slabs that ran $229.  The installer charged us $650, so the total was only $879.  Not too shabby for a newbie like myself.

In a Tight Spot, Peeling the Onion

At the start of the project, I was so naive.  What a joke.  I spent about 4 hours on my first full day at the house trying to peel little teeny pieces of wallpaper off in the main bathroom.

Only to realize a short while later that all the walls were coming down.  In the end, I thought the bathroom turned out really nice.  But it was a long time coming.

One of the craziest parts of the house was the “crawl” space.  There was only one spot down the main hall that wasn’t vaulted.  That one area was just the length of the hallway into the bedrooms, about two feet high, most of that filled up with the heater ducts.  Luckily Matt is thin, very fit, and totally a do-it-yourselfer.

He got himself into that attic crawl space, probably about 10 different times, to put in overhead lighting in the bedrooms and add ground wires to the electrical outlets.  I would be down below with a flashlight or voltmeter, yelling so he could hear and help guide him in the latest attempt to feed something through the little space into one of the ceiling openings.

And then there was the night that he dropped his favorite hammer and it went into the “abyss”, falling down one of the hallway walls, probably never to be seen again.  But we know it’s there!

Sweat Equity

You can see Matt in most of the pictures.  There are only a couple of photos of me during the long hours I spent while he was still at his day job (only for another 2 years though!).  Here’s some of the things I did during my six month adventure:

  • Set tile on the backsplash and replaced broken floor tiles
  • Bleached and recolored all the floor grout
  • Painted every wall, 15 new doors and all the new moldings
  • Stained and finished the front and back doors
  • Got on the roof to coat the gas line and check the new shingles
  • Installed all new vent covers and electrical plates
  • Went to Lowe’s and Home Depot possibly over 100 times
  • Cleaned all the water stained windows

But that wasn’t all.  I found myself living in those stained sweat pants, covered in paint and caulk.

I hired all the contractors, developed a great relationship with the hauling guy, brushed up on my high school Spanish, and learned to humor the Building Inspector.

Some of the contractors were overpriced.  Especially the ones I found at the beginning of the project.  I got better at a lot of things as we went along, but when I saw what seasoned flippers were doing, I knew I was out of my league.

All in all, I got a great education.

ZZZZZ — Sleeping on the Job

That Paint Bucket Makes a Great Nightstand


Toward the end we moved in.  Sort of.  All we really needed was an air bed and a barbeque.

Oh, and our little bird friend, Sterling.  Yeah, we have a 22 year old Senegal Parrot, and she got to come too.  In fact, she started copying some of the sound effects she learned on the job.  She learned almost as much as we did!

What happened that created a self-imposed deadline?  I found a tenant, a little early than we were ready.  Actually, I was shopping (evil — yes, evil — I was in a deprived need for retail therapy).  I met the store manager at our local Coldwater Creek and got to chatting.  Next thing you know, she wanted to come by and check the place out.

When she saw what we had done with the house, she wanted to move in.  After six months of work, I was anxious to wrap things up.  Oh, and start collecting some MONEY.  That’s what this was all about, wasn’t it?????????  Hey, sometimes shopping works out ok, right. 😉

Before or After?

I am not sure how to label these “final” pictures.  They are the photos after the project was finally complete.  But in a way they are the before pictures.

Before tenants, that is.  It was satisfying and fun.  As I like to say about most of the jobs I’ve ever done,

We had a million dollars worth of fun, but didn’t want a dime more!

Our Report Card

Yeah, it was a job.  Nice and temporary.  Looking back, it was well worth it.  Especially “net worth” it.

I went over budget.  Big surprise, huh?  All totaled, the projects cost $51,000.  With the original $84,000 purchase price, I had $135,000 invested.  So going back to the original IRR spreadsheet, how did it work out?

Using the calculator, it amounts to just over 9% return on investment.  Better actually, because the spreadsheet expects a 2% price appreciation per year.  Real Estate in our area has skyrocketed since 2011. Here is the current Zillow overview:

Our Report Card

One of the beauties is that the property tax is so low.  Even in 2018, after 7 years, the assessed value is just $90,910.  Property tax is one of the few taxes that are cheap in California, but in our case it was even lower.  In spite of 3 building permits with extensive work, they didn’t reassess the house because we didn’t add on.  Technically they could have, but according to a friend who works as a county assessor, they don’t like to adjust for remodeling.  Even something pretty massive like this.

All in all, it has turned out to be a good investment.  We have had just 2 tenants so far and they have kept the place in good condition.  The cash flow has been a key to not touching any of our investment accounts for income.  So far.  We expect to have repairs as the years pass, but rebuilding the majority of the home has kept the fix-it list really short.

Now our biggest problem is how to avoid the coming Required Minimum Distributions (RMDs) from our IRAs if we haven’t started moving money out before we each turn 70.  Figuring out how to hack that item is my next “job”!  Tricky for us, as we keep our income somewhat low in order to take the Obamacare subsidy.  The subject of an upcoming post, for sure, so stay tuned!

What Say You?  Have you ever bought yourself a job?



  1. Doc G

    Wow, great post. The first property is always the hardest because you just don’t know. You guys did a lot of great work! Thanks for the mention!

    • Susan

      You don’t know what you don’t know until you do, huh? Actually, we have one other rental property. We became accidental landlords way back when we could not sell our first place, which is a half-duplex. Another story for another time! And thank you for the great article you wrote, which inspired this post.

  2. Accidental FIRE

    Holy smokes, amazing job! That’s waaay over my head in DIY capability. The kitchen looks awesome, what a difference.

    And you’re right, it looks like they might have unearthed an Egyptian mummy in your excavated yard. I admire people who have the tenacity to do huge projects like this but don’t have much desire to do them myself. I’d find a way to screw it up

    • Susan

      An Egyptian mummy! I like how you think. The way these things go, if WE knew what we were actually getting into, we probably wouldn’t have done it. Looking back, it was a great time really. An adventure for sure.

  3. Michelle

    Wow…I am really impressed with that kitchen from Ikea! Who knew?
    I think this is one of the main reasons why my husband and I have really drug our feet on investing in real estate, especially through foreclosures and such…you never know what you’re going to get. You sound like you handled it really well. I think I would have been a stressed out mess. Bravo!

    • Susan

      Thank you so much! The IKEA kitchen was fun. The plumbing problems, well, you win some and you lose some. You only find out so much during the inspection. You do have to be prepared and accept risk, but that is no different than other investments. It’s a pleasure to hear from you.

  4. Mrs. Groovy

    Ditto on the kitchen from Ikea. I’m loving the farmhouse sink and the back splash.

    We’re in the same boat on those RMDs but I have a feeling Obamacare is going to be gone soon unless the government agrees to pay back the cost sharing reductions to the insurance companies. Otherwise I see no reason for them to stay in the market.

    • Susan

      I know you are thinking of doing a farmhouse sink at Groovy Ranch. They are great. That IKEA one was tricky because we had to drill the hole for the dishwasher overflow thingy (we, meaning Matt!). Scary, but it worked.

      Yeah, Obamacare is probably going to be gone soon. We are prepared, but taking the tax advantage while it’s available. I enjoy the information I get from people like you and Mr. Groovy who give me ideas on how to deal with things like RMDs and so on. It is a great community. Thanks for your comment.

  5. Steveark

    This is a perfect example of how one person’s dream job is another one’s nightmare. I retired early with a healthy FI margin but still stepped into a handful of consulting jobs I invented, not bought, that pay all my and spouse’s living costs. I didn’t do it for the money but I’d be lying if I didn’t admit I enjoy being at a zero withdrawal rate. I was taught to do woodworking and plumbing and some wiring by my crafty dad but I hate it. Consulting on the other hand in engineering areas is duck soup for me. I suspect my consulting work would be drudgery for you. The world needs us both and I really enjoyed this post!

    • Susan

      DocG had a follow up post that “nailed” this called When The Thrill is Gone. I had my million dollars worth of fun in engineering, and then I had it with rebuilding houses too. The best part of FI is being able to try different projects and adventures, and yeah, some of them have gotten us to that zero withdrawal rate. All the better. Thanks for stopping by.

  6. Zach @ Four Pillar Freedom

    Wow, awesome post. The kitchen looks spectacular. I love reading about how people quit their day jobs only to go out and find something they else enjoy doing…and inevitably make money doing so. Great work 🙂

    • Susan

      Thank you Zach. I enjoyed the kitchen design the most. I know you are a real fan of “tiny blocks”, so if you ever do a kitchen remodel, you would love IKEA!

  7. Mrs. Farmhouse Finance

    Great job with the renovation! My husband and I are getting ready to build our first home in New York, so I’m seriously jealous of those low property taxes. We are both teachers but usually work on some construction/painting projects during the summer. I’d love to buy an old house and fix it up like you guys did.

    • Susan

      I just checked out your site and the home design you have selected is the best of both worlds. Sorry about the property taxes. Can you believe our are low in California??!! I look forward to seeing how your beautiful home comes along. Good luck!

  8. Michael

    OMFG – that property tax number is my MONTHLY in NJ on a relatively middle class (2000sf) home. Taxes make rentals pretty challenging here. Then there is also a 1% transfer tax which also hurts flipping. Oy vey!

    • Susan

      It’s hard to believe that we have low property taxes here in California, but our proposition 13 from the late 1970’s is still standing. If you have a change to check out Mr. Groovy’s Interview on ChooseFI he may talk you into a move to North Carolina. It is amazing how expensive taxes can be. But we all have our reasons for staying close to family and friends. Good to hear from you Michael.

  9. Sean @ Frugal Money Man

    Awesome renovations!

    My fiancée and I are not yet in real estate, but we plan to purchase our starter home in cash in the next 3 years. We were hoping to do it in a way similar to this! Buying a property that nobody seems to want, and then fix it back up. I know I am probably overly optimistic with how that will go because you never truly know what its like to be a homeowner until you are a homeowner.

    Also, GREAT job on the kitchen! It looks amazing!

    • Susan

      You are going into it with the right attitude — that you really don’t know what it will be like. It’s an adventure and you will be happy to have done it. Afterwards! Thank you for your kind words, Sean.

  10. freddy smidlap

    lodi looks nice. i too am envious of those tax rates. i just write something about how they stick it to us with every tax in ny. i hope you drank plenty of zin during construction.

    • Susan

      Yes, Zin is another thing Lodi is famous for, and we drank our share of it during that project. In fact, you can see a bottle we were toasting with in one of the photos. We had a lot of fun there, or should I say “cheers”!

  11. Mr. Shirts

    I loved reading this – Sure it was a job for six months, but what a sense of accomplishment in addition to the 9% steady cash return on your money and almost $200,000 in “deferred income”.

    • Susan

      Projects like this really do have a great sense of accomplishment. Glad you enjoyed the story. Sometimes the “deferred income” feels like it tallies up on the net worth statement but otherwise you can’t feel it. But the income has made a big difference. Good to hear from you.

  12. Satisfied Ghost

    I love this post! I actually grew up in Lodi and bought a rental there in 2009. Also a foreclosure. We did quite a bit of work too. Not as much as you though! It’s really appreciated as well. You got a great deal on it. It’s amazing to me how Lodi has changed over the years. It’s really becoming more of a destination. I wish I would have bought more property there during the crisis. I like all the detail you shared and some of your choices. I learned a lot too and have been learning more during some remodeling on my house in the Bay Area. Glad to find your blog. Perhaps we can compare notes?

    • Susan

      What a coincidence that we both bought in Lodi. I also wish I had bought more property there, especially at those bargain prices. Yes, we should share our stories. I will be in touch. Great to hear from you.