Cat Litter House: Flip # 653 and it could be the worst one yet. Look at the pics and you decide.

[Brian Burke]

Some flips are easy...paint, carpet, clean, and list.  Then there are the hard ones. 

I've never posted a diary of a flip before.  With over 600 flips under my belt I sometimes think that I've seen it all.  Then I see something I haven't seen before.  This time, It's so outrageous that I couldn't resist sharing.  I'll share the visuals, but fortunately for you I can't share the smells.  This is kind of a diary and kind of not...I bought it in January so you don't get the day-by-day play-by-play, but it's not done yet so this isn't old news either.

I came across this deal from a wholesaler who I met on BP (thanks yet again BP for making me money).  He hadn't seen the house in person but he had heard it was in bad shape.

I sent my acquisitions guy down there to look at the house. When he came back he said, "that's the worst house I've ever seen." At first I thought "Come on, really? You've looked at over a thousand houses for me!" Ultimately, I took his word for it. We threw a number at the rehab and ARV and made an offer. It was accepted.

Here are the numbers:

ARV $400,000 (probably a little more, I hope)

Rehab $175,000 (probably a little less, I hope)

Since there were some unknowns I had to make a conservative offer.  It would take a while to fix this place up, so I had to add some margin to cover the carrying costs. 

My offer: $125,000.

Closing was about a month later.  The seller agreed to move out and leave the key at the title company.  On move-out day, I went down to the house to see it for myself for the first time.  When I opened the front door, this is what I saw.

Ok, so now I knew that my acquisitions guy was right!  We were in for it!

Have you ever seen anything like it?  Wait, it gets worse.  More to follow!

[Bob E.]

@Brian Burke Hats of to you sir for taking the hight road and doing full disclosure up front. Much better to explain it now then in deposition latter.

[Account Closed]

I had a hoarder house last year. It took me two weeks just to trash it out.

[Andy Mirza]

Fantastic post! I've only dealt with minor stuff compared to this. Thank you for sharing the experience. I've definitely picked up several useful tips.

May you have a quick sale for top dollar!

[Nick Fitzpatrick]

@Brian Burke , wow great flip, I'm sure everyone in that neighborhood loves you now. Made yourself a few bucks and everyone else's property value just went up! Great before and after photo's I'm always terrible with the before's and wish I had them after. 

[Damon Armstrong]

@Brian Burke 

If you would've seen the property before hand, would it have affected your 125k offer?

Do you regret that offer? 

If you would've known the condition was this bad beforehand, what would your offer have been knowing what you know now?

[Bill Berklich]

OMG... I've never actually seen cobwebs that big except in the Movies!!!

[Nick Payton]

@Brian Burke Excellent before and afters Brian!  This is a very professional flip.

How do you determine the upgrades you will make?  Do you take picture, along with the house layout, and sit down and brainstorm with your contractor?  Was this a similar process for your first few flips?

Thanks again for a great thread!

[Alex Janesz]

@ Brian Burke This was an absolutely tremendous post. No matter how long you have been flipping houses, this one was certainly a labor of love. My contractor would leave me in the dust if I ever presented a property like this :) Thank you for sharing your journey. Also, I just listened to your first podcast on BP. It was a great listen. You are an organized and thoughtful professional. Best of of luck. 

[Steve Babiak]

Hats off to the "after" photographer for getting the photo angles to really closely match the before photos. 

When I look at the after photos of the siding where there had previously been a deck, it seems there is some difference in the paint shading. Just an observation

[Account Closed]

Originally posted by @Brian Burke:

Yes, we've had two total so far.  I made a really onerous looking pictorial exhibit plus an extensive disclosure statement. Sending that out to buyers once they submit an offer. Both retracted their offer.  Not unexpected that this would happen, but I only want to sell to someone that fully understands what they are buying.  The right buyer will come along.

Both retracted their offer? That's interesting to me.  When buying a completed rehab with a partial gut you're getting partially new construction.  I would think that would be a plus.  Does the disclosure include comments about odors?  IMO the picture show lots of almost over the top remediation that to the layperson should be comforting. Or do you think the retractions are related to the house having a hoarding history?

[Jessica H.]

awesome job!

[Steve Babiak]

If offers keep getting retracted, then drop the price to the low end of comps or even a bit less, since you are still making money at that price. And emphasize that the sale is below market value - appeal to the bargain hunter who will recognize a good bargain and not pass. 

[Kim Gloor]

I do not know how anyone could live like that! However, the trash is removable. How are the bones?

[Tina Gilbert]

Wow!  Amazing!

[Ericka Mizuta]

I smell money!

[Brian Burke]

Originally posted by @Damon Armstrong:

@Brian Burke 

If you would've seen the property before hand, would it have affected your 125k offer?

Do you regret that offer? 

If you would've known the condition was this bad beforehand, what would your offer have been knowing what you know now?

My acquisitions manager saw it before we made the offer, he told me it was bad and based off of his report I somewhat suspected what I was faced with.  I planned accordingly.  I didn't have a clue how bad it was, however, once the top layers of debris were peeled off.  That's OK though, my budget had plenty of allowance for the unknown, because I the one known on this one is that there would be plenty of unknowns.  I don't regret it one bit.

[Brian Burke]

Originally posted by @Nick Payton:

@Brian Burke Excellent before and afters Brian!  This is a very professional flip.

How do you determine the upgrades you will make?  Do you take picture, along with the house layout, and sit down and brainstorm with your contractor?  Was this a similar process for your first few flips?

There wasn't much need for brainstorming, this one just needed everything.  Strip the layers back and keep stripping until you find something good.  Once everything left is good, stop peeling back the layers and put it all back together.  No science to it, really.  This is the process for most of my flips, although there are a few that are simple enough to come up with a plan that I can stick to.  Most of them, however, have so much that you don't know until you start demo that plans change.  I've learned to plan less.  It just takes up time.

[Brian Burke]

Originally posted by @Steve Babiak:

Hats off to the "after" photographer for getting the photo angles to really closely match the before photos. 

When I look at the after photos of the siding where there had previously been a deck, it seems there is some difference in the paint shading. Just an observation

The "after" photographer was Steve Jobs.  Or at least the phone that he created, held by an incompetent photographer that knows very little about taking photos...with an iPad in the other hand with the "before" picture so I can frame the two exactly the same.  Time tested trick.

No difference in paint, the issue is the siding...the stores sell T1-11 with a rough surface, this house was built with T1-11 with a smoother surface.  Couldn't match the woods exactly so they don't totally match.  Wasn't up for re-siding the whole house, though.

[Brian Burke]

Originally posted by @Account Closed:

 I agree, this is as close to new construction as you can get in a 1980s vintage house.  When writing the disclosures the only thing I stopped short of was drawing a skull and cross bones.  I just don't want any buyer to say later that I wasn't honest about the house's history.  If they walk, fine.  Rather have them retract their offer than regret their purchase.  Life's too short.  I don't even want to give them a counter offer until they've seen my disclosures.  I'm in a strong market, someone will see this for what it is and realize that this house is better than any other remodel.  It just has to be the right buyer.

[Todd Norris]

@Brian Burke Did you recycle :) That's the worst house I've ever seen. Thanks for the entertainment.

[Edwin Duran]

WOW awesome job! Truly an inspiration

[Rick Baggenstoss]

@Brian Burke Great post.

How did the first few conversations go with the GC?  Was it a fixed bid from them?

[Matt Laird]

@Brian Burke 

Very well done.. Also wanted to say I enjoyed your podcast.. Thanks for sharing the wealth of knowledge and experience.

[Brian Burke]

Originally posted by @Rick Baggenstoss:

@Brian Burke Great post.

How did the first few conversations go with the GC?  Was it a fixed bid from them?

 No, time and materials.  On something like this, a fixed price bid would be meaningless because the change orders would have stacked up.  Not to mention that on a job with this many unknowns contractors are very likely to put an expensive risk premium on their bid.  I'd rather take the risk myself.

[Brian Burke]

Originally posted by @Rick Baggenstoss:

@Brian Burke Great post.

How did the first few conversations go with the GC? 

 And by the way, the first conversation went like this "hey, you guys need to go buy some moon suits..."