Question on Rehab Costs

[Alex Linden]

Hey everyone,

I have been looking into a property that I think would make a decent rental if I am able to get it for the right price; however, I have a couple concerns in regards to possible rehab.

The property is a 2 bedroom/1 bath  1100 sq/ft listed at $50000, which I will be able to turn into a 3 / 1 after renovation; comps for the area show me I should be able to rent the property for $850 - $900. 

Now then, I am a little concerned on my rehab budget mainly because of 2 things. It is an older property that has about half Knob & Tube wiring which I would replace before renting. The attic room (this is where I can make a 3rd bedroom), main bedroom, and dining room all have Knob & Tube while the kitchen, basement, bathroom, and 2nd room have updated wiring. Since I already know I would update the wiring throughout the home prior to renting, does anyone have an approximation on the cost for that? This is something I would have to hire out to a contractor as I do not have experience in electrical work.

The other unknown expense for me is that I believe the upstairs attic room which I intend to renovate has Asbestos tile for flooring (the stairway to the attic room has the same tile). I believe I would be able to replace these tiles with porcelain tiling on my own; my main concern is the fact that they may be asbestos tiles. Is this something I should just steer clear of and have a professional come in because of the tile type to avoid possible future legal issues or could this simply be a deal breaker for the whole project?

In addition, this would be my first buy & hold property. While I am confident in myself, because of these 2 potentially difficult risks, would I be better off biding my time and continuing with my deal analysis rather than jumping in on this property?

Any input on this would be excellent!

Thanks,

-Alex 

[Owen Dashner]

I would advise against doing this one as your first project.  Asbestos removal and rewiring are expensive (and liklely just the tip of the iceberg), plus you will need to make sure the attic is up to code for a sleeping room (proper HVAC, 2 points of egress, etc., etc.).  Once you start opening up walls for electrical and ductwork, you have a can of worms with older homes.   If you already had a few rentals/rehabs under your belt, maybe.  But the rents you will be able to get are not going to give you enough return on your time and money when you add it all up at that purchase price.

Just my opinion, of course.  But I did a project just like this for my very first flip, and ran into a lot of unexpected costs and spent way more time than I should have because of my ignorance.  

If you do end up pulling the trigger on this one, the silver lining is that you will learn a TON about the rehab process because you are going to encounter a lot of things you didn't plan on.