What do you fix first on a project?

Question

I'm new to bigger pockets and have been listening to a lot of the podcast over the last few weeks.  I'm interested in purchasing a 2 flat or 3 flat in the north side of Chicago but have found the market to be very competitive.  I've finally found 3 "decent" properties that need some TLC to bring them up to their old glory.  I've submitted my offers and the 3rd property which is on the the higher end (200k) has been accepted.  When I saw the property I knew it would need considerable work and after running the numbers I knew it was a good deal but I would have to do some of the fixing.  My question is how do I determine where to start? The property has new plumbing, new HVAC unit, both bathrooms have been 90% completed and new floors. The kitchen on both floors is non existing- Basement and attic are completely gutted plus it looks like it might need a new roof and siding on one side of the building.  My original budget for renovations was 40k but now I think I might of chewed off more than I can handle.

Cooper Bert · Answer

I agree with the above comments on home inspection and killing the deal if necessary.  It's better to sit at home reading Bigger Pockets than to be working on a money losing project.

In regard to the order of the repairs you listed - Always secure the roof and foundation first.  The term of getting a project "under roof" means literally just that.  You don't want to do interior finish work and then find out that the roof is unsound, causing water damage to the work in progress.  The same goes for foundation work.  Any foundation shifts during repairs to shore up the foundation could also cause damage to work in process such as drywall & tile.

Repair the roof before the foundation.  What appears to be water damage to the foundation can be caused by water intrusion at the roof that travels through the walls into the foundation (typically in block foundations).  Repairing the roof first allows you to observe if the foundation water issues have been resolved.

Make the property secure, waterproof, airtight and foundationaly solid first.  Them move on with renovation.

Michael Boyer · Answer

Agree with inspection/contractor ideas and with Cooper Bert. I cringe when I see fixxer upper folks pour tens of thousands into interior finishes with a roof near failure. Roof first if it is near the end of its useful life.

Siding I would also look at for weatherproofing (wind driven rain could also rot your building).

Once it is water tight, I would start on any code issues (see inspector mention), then maybe on to kitchen.

But I would do it all with some professional guidance so you don't have to "redo" anything (like go back and update electric after you have finished the walls, having to tear back into them).

Eventually, I think you can develop a scope of work (as Matt  mentions above) for all the repairs or a chunk of them and work with a contractor. Here is an older scope of work blog I did awhile back:

https://www.biggerpockets.com/blogs/7365/47259-fun...

Also, there is a ton of good info on working with contractors on BP (the flip strategy has some good coverage for example). Finding a good contractor(s) might be a near term objective.

Best of luck

Jeff Burdick · Answer

Have you done a home inspection?   I would recommend getting a good, professional home inspector to do a home inspection while you're under contract and rely on his/her report.

Dorothy Wulf · Answer

Congratulations Gabriel on your purchase! $40k does seem low for needing two kitchens, labor, roof, permits etc. Do you have a contractor?

Karen S. · Answer

I was just going to say that if the bathrooms are ninety percent finished, and the remaining 10% includes a missing sink or toilet, I would work on that first. Who wants to waste time going down the block to Mc D's to use their bathroom once the workers arrive?

Cooper Bert · Answer

YES, your lender will likely NOT approve your loan IF they know the 3rd unit is not "legal".  This issue usually comes up with additions so you need to check for permits and inspections on the 3rd unit.  If it's permitted and has had final inspection, you should be good.  This is something you can check during your due diligence period.

IF it's not approved, you need to discuss the issue with the building department NOW.  Tell them you are considering buying the property, you don't know if the 3rd unit is approved (don't say "legal") and ask them what they would do if they were you.  You'd be surprised how frank some of these guys are when you ask for their help. Answers will range from "You have to tear it down" to "Don't worry about it, we can approve and inspect retroactively".

This breaks the rule of "It's easier to ask for forgiveness than permission" but you definitely need to find out if a buyer will have to demolish a third of this property!!

Good Luck!

Gabriel R. · Answer

Have not been on in a few months as I have been traveling! I recently came across a property that is a 3 flat but the seller "does not warrant legality of 3rd unit".  Will I have a hard time getting a loan for such a property? I have a pre-approval from a Lender but I dont know if they will approve this property.  Has anyone else ran into this in the past?

Crystal Smith · Answer

I'm coming to this post late but.....  Assuming the plumbing & HVAC are new & operable & the bathrooms are 90% complete I'd start in the following order:

• Electric- Ensure it's updated
• Roof- Get it certified or replace it
• Kitchen & Baths- Finish Both
• Attic & Basement- Only spend $ on the attic & basement if you can figure out how to get a return on your investment from spending $ there.  i.e. Can the basement be turned into a legal apartment;  can you put laundry in the basement available to your tenants for a fee;  Can you duplex down to the basement or up to the attic to make them liveable spaces & get more rent.  
• Siding

Good luck

Wes Brand · Answer

Figure out what the max you can offer is BEFORE you put in an offer. Don't let yourself get sucked into a bidding war.

What do you fix first on a project?

Most Popular Reply