Complete Rehab and Addition

[Tyler Nemmers]

Hello. First timer on the Forums here and I wanted to reach out for some advice

A little about me: I live in Madison, WI. I just finished my second live-in-flip. I did almost all the work for both flips myself, with a few helping hands from family every once and awhile, so I'm very handy. I also own a single family and a duplex with a business partner. I bought my first house in 2015 and bought my first rental in 2017, so I'm not crazy experienced but I do have some.

Property: There is a property on the market that is 35 feet from the water (not sure if folks usually put the addresses on the forums?). It's listed for $275,000. It's been on the market for 36+ days. It is in very bad shape. Not only is the layout weird and small, but you walk (pretty significantly) up and down hill as you step through the main level. I'd love to tear it down and work with a builder to just put a fresh new building on it, but from my initial research, that takes a lot more time and permits, and people seem to lean towards taking it down to its studs instead of a full tear down. While I've done a lot of remodeling, I've never done that, and seldom work with contractors (since I do all the work myself). Nice houses on the water near this property, can go from $400,000 to even $700,000.

My Dilemma: The short of it is, while I'm excited to do something like this, I've never done something this big, both in terms of amount of renovation and amount of cost. I have $72,000 in equity on my current home (the second live-and-flip) but would need to take out a construction loan to do the actual flip. I'm a little apprehensive since I've never done a construction loan or worked with contractors to essentially rebuild a house. I'd also like to do a second story addition. What I'm looking for assistance on is any insight into this process, and how I should go about analyzing and preparing for this type of deal.

Looking forward to chatting with you. Thanks in advance!

[Keith Schulz]

Hi Tyler,

I know the exact property you are talking about, and a couple of my agents have shown it to other investors. I do think there's potential (since the Madison chain can bring big dollars), but I think it should be torn down and re built slightly higher to eliminate flooding concerns (2018 was a bad year for houses flooding in that area). Also, if it weren't looking at the beltline, I think I'd have more confidence in the comps. In any case, if you are thinking about going for it, my advice would be to get a contractor involved before an offer. Known your numbers on the rebuild side as accurately as possible, and know your comps well. My thought was it would take at least 700k to buy the lot and build a reasonable house. ...but I think 700k is pushing the limits on what it should sell for on the river (instead of the lake) and looking at the beltline. However, there's very limited inventory with access to Monona and Waubesa, so who knows, maybe it will go for a crazy price. Just my two cents. Hopefully it helps, not hurts.