Diary of our first Historical Rehab and Company Rebranding

[Matthew Hicks]

Before I get Started. @Joshua Dorkin

@Karen Margrave suggested that I @mention her, you, Will Barnard, J Scott, and Jon Klaus for a diary that I'm going to do on BiggerPockets for our first venture into a historical renovation. For some reason, I can't successfully mention anyone but you. Hopefully you can reply to this forum post and @ mention the forum members that Karen suggested.

I think this diary could be very useful for the Bigger Pocket community as Historical Renovations are a very niche product. I've also done a lot of brand work that will help to sell our houses in an area that has a lot of flip competition. What we are looking to pitch our company as, is relatively unique. We are looking to basically provide a custom home building experience to redeveloped historical (some officially others just in old neibhorhoods) urban houses by providing the same level of service that a high quality custom builder provides to their clients.

INTRODUCTION

I'm currently working on our first and second historical renovations in the historic Deutschtown neighborhood in the North Side of Pittsburgh. We have renovated 4 homes in the area, many with historical features, but this is the first house we've done that has required approvals for facade renovations with the city Historical Review. More importantly, the scale here is dramatically larger than other projects we've done in the past.

Our previous projects have had purchase prices in the $20k-$50k range with renovation costs in the $80k-$150k range. We purchased our current properties (2 side by side attached 2,900 sq ft brick park front homes) for $135k and estimate rehab costs to be $395k-$435k.

We plan to Sell the homes for between $395k and $440k per house. The range is partially do to my initial estimate on sales target possibly being a bit too low, and because we will custom finish the homes and buyers will have an array of finishing options. We also plan to market these homes like a new home builder. I'll detail how we plan to differentiate in that way in another post.

Like J Scott's diary, my hope is that this thread will end up being a helpful case study, not only for historic renovations, but also for creating a brand for your flipping/renovation business.

I will try to be as thorough as possible in my posts, including pictures, schematics, design boards, optional features we plan to offer, marketing and branding materials, and of course a thorough documentation of our construction process.

I'm hoping that this process will be helpful and insightful for members at BP, but also that experts with more experience than me will chime in so that hopefully I learn a lot as well.

I will follow up with my first post in the diary shortly.

[Matthew Hicks]

Week 1: Purchase Decision, the Start of an Idea, Neighborhood Background, and Before Pictures

Purchase Decision

I actually bought these properties site unseen as I operate out of Pittsburgh but live in New York City. My contractor acts as a partner in my deals through bonus payments (as opposed to officially through an operating agreement) and is also a very long term friend. He did the walk through and after some discussion we decided this wasn't a deal we wanted to pass up. He thought we could renovate the homes for $170k a piece on a quick pass (there were other investors looking and we needed to act relatively fast). Knowing that he tends to underestimate, I assumed $200k a piece and the numbers made sense, so we forward with the purchase.

The homes are park front homes about 15 minute walk from the Steelers and Pirates stadium and 20 minutes to the casino and downtown. Geographically speaking, it's a great location. The homes are ~2,900 square feet apiece, three stories, and they share a center wall, but are currently turned into 7 apartments, some of which are out of code. The before pictures show quite a few interesting items were found in the homes including a prosthetic leg and a wheel chair. One nice surprise that my contractor saw but didn't fully appreciate initially, is that the original stair cases are in great condition (relatively speaking) and can be restored rather easily. We are pretty excited about the stairs, but it was difficult to fully appreciate them with the dropped ceilings that were place

We HOPED that once we tear everything down to the studs that we'll see beautiful hardwood floors in need of refinishing and beautiful exposed brick on the shared wall that will help to sell the homes. We also know the ceilings are much higher than they appear but can't tell exactly how high on all floors.

The start of an idea

I've had an idea that I've been toying around for a while that I think would work quite well in Pittsburgh. Since we are going through a very strong re-urbanization trend, there are a lot of abandoned homes that need to be redeveloped. It's obviously attractive for a re-developer (I think flipping isn't appropriate for homes that are purchased for 25-50k and rebuilt for 100-200k per home).

The problem is that because of all of this potential inventory, there are a lot of people redeveloping homes. The result is that you can get your price on homes but that buyers have a lot of reconstructed options to choose from.

My idea to get around that is to offer a product that allows borrowers to finish their homes to their own desires.... not a novel idea by any means, but we have a few tweaks to the idea that I think makes it at least somewhat unique, particularly for urban re-developers.

I decide that the size of these properties I'd just purchased along with their prominent location (Park Front and near a hospital) that this was the perfect time to put this idea to paper and get started on moving from being a nameless re-developer to a brand name company with a unique process, excellent customer service, and top quality homes. Since this time, building out the brand and process have taken up every bit as much tine as planning our $400k construction job (I also have a 50+ hour a week full time career so that has mean a lot of 6 am-11 pm work days lately).

Neighborhood Background

I think it's helpful to give a little bit of detail about the area I'm working in. It's pertinent for a lot of investors that are working in the rust belt cities and the neighborhood itself is just historically very interesting. The North Side of Pittsburgh consists of 18 different neighborhoods. Some of them are still some of the most dangerous neighborhoods in the city. The area as a whole has been slow to turn around compared to some other areas of the city, but it is happening. A few are turning around faster than the others. Deutschtown (East Allegheny) would probably be in the top three neighborhoods in the area.

The amazing thing about the area is that at one point in time the North Side used to be a separate city called Allegheny City. During the late 1800s during Carnagie's steel empire building days, Allegheny City has more per capita millionaires than any other city in the world. it was a small, but insanely wealthy city. Today, there are homes that range from very modest to stately brick/stone homes that are in the 7,000-12,000 sq ft range. Most of these larger homes have been turned into apartments, many that are barely fit for living. Some of the smaller "large" homes have been refinished over the past 10-20 years. In the past 3 years, the pace of improvement in the area has accelerated dramatically.

Pre-DemoPictures

Now the fun part:

Next Post: Detailed Budgeting, Building out the Brand, and Architectural Drawings and approvals, and demolition.