Sanger BRRRR Project Almost Derailed by City

[Jay Orlauski]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $125,000
Cash invested: $85,000

1 bed 1 bath home from a wholesaler for $125k - added a room to make it 2 bed/1 bath. During construction of the addition, the city happened to be working on the street and noticed our unpermitted project. They red-tagged us and we were forced to pay for plans to be drafted, approved, and several inspections before they permitted us - set us back several thousand dollars and an extra two months as a result - still, we were able to complete the project and still appraised for more than we spent.

What made you interested in investing in this type of deal?

The opportunity to add value to something that needed some TLC

How did you find this deal and how did you negotiate it?

It was sent to me through a wholesaler and as soon as I saw it I knew that I wanted this to be my next project - I was able to negotiate a little off the top - but overall was satisfied with our purchase price

How did you finance this deal?

Down payment was my own cash , hard money lender for the balance, and credit cards for the rehab

How did you add value to the deal?

Add 1 bedroom to the house, HVAC and ducting throughout , rewired interior electrical, all new dual pane windows, replaced doors, new carpeting in the bedrooms and wood plank flooring in the living room, tile in kitchen and bath, added new baseboards and painted interior, replaced all doors in the house, granite countertops, new cabinets, all new appliances, a laundry room / new closet, remodeled bathroom, new tile in shower, redid some roofing, and painted the entire exterior.

What was the outcome?

A beautiful 2 bedroom 1 bath house that has become our next rental and is already rented out

Lessons learned? Challenges?

Don't do construction without permits while the city is working on the street in front of your house - also don't pay for cheap labor - you'll just end up spending the money having it done the right way at the right price. Timing was really bad - the contractors lined up to do the work were not available by the time my lender funded, so we sat on the backburner a couple of weeks - just in time for the city to be doing work in front of our house and notice our project had no permit - major delay

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I am my own agent, but it was a wholesale deal anyway - also worked with a local hard money lender that I will NEVER use again - not naming names, but I'll tell you if you ask me. We refinanced with Owning and we were pretty happy with them for most part -