Avondale Rehab 101- Where to Start?

Question

Happy Friday,

I have been following BP on and off for the last few Years and this forum as well. Lot's of experience and smart folks on here. I am reaching for advice/tips/suggestions. My situation...

I purchased a short sale property in the Avondale Neighborhood a couple of years ago. Needless to say, I have been dragging my feet on the rehab of the property due to other projects/personal matters etc. however, no excuses it is time for me to put together a proper rehab project plan from A to Z including funding, rehab costs estimations, setting expectations for the work/milestones etc. The property is an older frame home that sits on a slab foundation. I have semi demo'd it however I am sorta stuck on where to start? I have not secured funding, established a proper project plan or design just yet. I would love to tap into this communities experience and ask how do you go about rehabbing a property? Do you have a check list, project plan charts? I am really starting from ground zero and my only experience was a rental duplex I rehabbed and flipped two years ago which turned out to be a solid deal/experience however I did sort of wing it. I want to do things the right way! any advice would be appreciated apologies for the long post. Thanks have a great weekend - Tomas Saenz

Henry Lazerow · Answer

Congrats, Avondale is awesome area. I work with a lot of clients who buy in Avondale and have seen the ARV etc. they can produce. The basics....

White quartz counters, white shaker cabinets (lowes), SS appliances (I get from ABT great customer service), In unit laundry, refinish/stain the floors, light colored paint throughout, skim coat to make it all look new. Bathroom similar scheme as kitchen. This is assuming you are talking 2-4 unit it is hard to tell from your post or if you bought a SF?

No need to go too fancy. Rarely do I see pulls of permits unless you already have violations.

Jonathan Klemm · Answer

Hey @Tomas Saenz - As I am sure you know, Avondale is one the top neighborhoods in Chicago so I am sure this will be a good project for you.

I think the best place to start is likely to link up with an architect.  I know both @Samuel Pavlovcik and @Prashanth Mahakali work with a bunch of BP investors and can help you get going in the right direction.  If you are down to the studs you will definitely need plans and they are the people that can help you figure out exactly what you can build.

Once you have a set of plans then you can in parallel start talking with contractors and lenders.  If you need some decide lenders feel free to reach out and I can provide some contacts that work well in the rehab space.  From there submit your plans, get your funding secured, select a GC, and then get to work!

Feel free to reach out and happy to discuss your project in more detail.

Costinel Mirea · Answer

Tomas, thanks for sharing this experience! It gave me more confidence to keep looking and learning more to hopefully buy my first property.

Tomas Saenz · Answer

I'd like to follow-up on this and update the BP community.

At the end of the day I sold for about 20 K gross profit on my initial purchase however taking into consideration taxes, holding costs, and rennovation costs I am closer to break even. Some reasons I decided to sell:

• 1) I jumped into this purchase during covid with no real financing in place for renovations. I'm a w-2 emplyoee and did not have a huge rennovation fund to cover the costs. Saving a percentage of my check to fund 20 - 30 K in a timely fashion was not ideal.
• 
• 2)The house itself was in a hot location (Belmont and Lawndale) which is the main reason I bought it. However, the house itself was very old, odd layout and needed its share of repairs. I did not see it worth my time or costs to seek financing to repair as I could probably find a better deal that be worth the effort.
• 
• 3) Lastly, freeing up that monthly loan payment is a huge relief and gives me. flexibility. Going forward I am going to niche down and plan my purchases in a much better manner (financing, lenders, rent/flip ARV analysis). All in all it was a great experience and to be honest it has only made me more eager to keep going.
• 
• Being relatively new to RE investing (2nd Deal) it didn't help that I was managing this project from out of state. I learned a lot and eager to jump back into another flip opportunity ideally. This time I am much more measured in my approach. I would be happy to chat more about it - Tomas Saenz

Michael K. · Answer

Hi Tomas, is this rehab for the purpose of renting long-term or selling? In my mind that is the first thing that needs to be determined. Based on your comment, sounds like the property is currently uninhabitable. I'd start by looking at rental and sales comps in your area to see what it takes to get a certain sale price or rent level. Get some people with experience into your building to give you advice, might cost you some extra $$$ up front but I think it's worth it if you're undertaking a big project. What did your flip entail?

Crystal Smith · Answer

Where to start? We have a checklist

1. We're not inventive so we pull comparables with lots of pictures of recently sold properties near the subject property, to get an idea of what it is we want to do for a renovation.

2. We've been doing this for a while so we run some preliminary numbers on our own to establish a budget (It's the beginning of our scope of work)

3. If it's a full gut we then bring in a self-certified architect.

4. Then we'll put together our scope of work, sometimes with, sometimes without architect drawings,  to get bids from contractors. We have some repeat contractors who we may give the budget target and other contractors we just want to see their bid.

John Clark · Answer

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1. Analyze the neighborhood as to what fits with its character, housing stock, etc.

2. Find out what rents are for comparable new construction -- this establishes your income stream.

3. Figure out ongoing costs to deduct from that income stream -- vacancies, reserves, property taxes, insurance, return on investment, capital goods (stove, refrigerator, washer and dryer, et cetera, et cetera). This establishes how much you will have available to pay for the financing the new construction, and therefore how much you can borrow and at what terms (you tinker with various scenarios).

4. Go to an architect with your budget and what you want the house to look like that will achieve the rents you neighborhood can generate. Have him draw up plans.

5. Shop for general contractors who have the ability to execute on your plans. DO NOT HIRE FLAKES. (see step six).

6. Arrange financing, with title company to administer the construction fund. Title company might be able to tell you which general contractors it has had the fewest problems with -- interview them to start.

7. Get your head examined. Chicago is pro-tenant to a fault. You will have a miserable time. Sell and check out NW Indiana instead.

Avondale Rehab 101- Where to Start?

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