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Updated over 8 years ago, 05/21/2016
Philadelphia, PA - Brewerytown Flip - Troy S. & David Ross
If you'd like to follow along and watch as my partner @David Ross and I flip a Brewerytown row home, the link to our blog is below. I'll also post pictures and updates in this thread but I won't replicate what David has already done so well to date. He's the keeper of spreadsheets so I won't go into numbers too much but it's safe to say, we're in over our heads already. I *think* we'll get through this and make some (very little) money but there are no guarantees. The beauty is, David and I are very similar in our approach to this first flip; first and foremost, we want to put out a product we're proud of. Secondly, we won't feel we've failed if, once the flip is sold, we can break even. If we can get a free education from the school of hard knocks, sign us up. Obviously we went into this flip expecting to make money, and we still could, it's just never been our focus since day one. That said...DAMN it'd be fun to turn a profit!!!
Here are a few baseline numbers:
Purchase - $60k
Rehab budget - Initially $20k and 3-4 weeks, now scope has ballooned and we're at $40k and 2 months
ARV - Initially $115k, now $135k. We weren't going to move walls or finish the basement but, to compete and to offer a comparable product to others that have sold, we felt we must (so did our wives). There are a few sold comps that support this but, not on this exact block and Philadelphia is not just a city of neighborhoods, it's a city that can change drastically block-by-block and property values are no different. One block the wrong direction can be an easy $20k difference.
So, follow along, ask questions, tell us what we're doing wrong (and right, if that were to happen) and enjoy the show.
Good luck Troy. I love your Argo site, looks great. Is there a way I can "follow" your updates with an RSS feed or something so it pushes out to me? I just closed last week on a duplex in Point Breeze/Newbold and we start renovation in the spring. Good luck to us both - we may need it :)
Originally posted by @Drew Palmer:
Good luck Troy. I love your Argo site, looks great. Is there a way I can "follow" your updates with an RSS feed or something so it pushes out to me? I just closed last week on a duplex in Point Breeze/Newbold and we start renovation in the spring. Good luck to us both - we may need it :)
Nice @Drew Palmer , is it a flip or buy/hold? Can you share some initial numbers?
It's a buy/hold but the plan is to do a renovation and cash out refi with a commercial loan (its done via an LLC). we paid about 47k per unit. the renovation should be about 20k/unit so we will be "all in" at 67K per unit. based on future rent levels and the debt service coverage as well as current appraisals in the area, we feel pretty good that we can pull the 67K out upon the refi. we should grab coffee in six months and see how we did!!
awesome thread! I'll definitely be following. My partner and I have been searching for our first flip as well in either Philadelphia, Montco, or Bucks.
By the way, I'm an electrician if you ever need one!
@Drew Palmer Can I pick your brain a bit about that property? I'm looking to do the same thing except up in oak lane / mt airy.
Sure, I will PM you and we can discuss a bit more.
Great blog. Love the transparency. Keep it up guys
Good stuff @Troy Sheets and @David Ross
The site looks great. I'm looking forward to watching the progress on this property.
@Troy Sheets this looks awesome and I'll be following. Is there any reason why you opted for the 1/2 bath in the basement as opposed to the first floor?
Thanks all!
Tim,
It's a small row home and the 1/2 bath on the first floor would've eaten up the dining room completely. The one side of the dining room already had the 2nd floor/basement stairs taking up a huge chunk, if we'd added it to the other side, which is the only place it could (maybe, possibly) have worked, it would have closed off the dining room into basically a big hallway. Right now we have a nice open flow from the front of the house, through the dining room and kitchen, to the sliding doors out onto the back deck. We wanted to keep that feel. We also envisioned the finished basement as a family gathering/hangout/kids area so it made sense to have the 1/2 bath down there. It would have been cheaper and easier to put it on the first floor and we definitely played with every layout we could think of, there were just none we could come up with that didn't block off the middle of this narrow row home.
If there's one thing we've learned thus far, EVERYTHING is a compromise. It's especially tough when the budget is tight because the ARV is so low. We want to put out the absolute best product we can but still show a profit. The 1/2 bath going in the basement was no exception to the compromise I mentioned; it cost more for a macerating toilet, ate up valuable finished basement space and doesn't make quite as much sense as a 1/2 bath on the first floor for company.
Even the labor is a compromise. So far, other than rough electric and plumbing, we're using day labor/handymen types and pitching in a bit ourselves nights/weekends. It's saving us a fortune but it's much slower going and much more management intensive. We also have to purchase materials with using handymen/day labor, which saves money but it's another step we're involved in that takes time. I had to source the windows (which we didn't plan on replacing, but now are) and pick them up. I saved $40/window (x7 windows) by sourcing myself over what the GC quoted and have day labor installing for a total on labor of $500. GC quoted ~$1200 in labor, so we've saved ~$1k on window and install costs but I've had to source and pick up the windows as well as help my day labor measure them all. Long story but, the original windows were replacements installed under/behind drywall so we had to demo all the drywall around the windows and some packing/framing to measure each replacement window.
Same with electric. We had the GC rough in the new stuff for permit purposes but we also moved a bunch of walls, etc. This necessitated moving quite a bit of electric, adding some for closet lights, getting rid of some fixtures that didn't make sense and adding can lights. GC quoted ~$1k to tidy up the electric, not including adding any can, closet or hall lights. For $375 in day labor and a few hours of my time helping identify circuits, we got all the electric moved and all the lights added. Big savings but, again, I had to spend time tracing circuits, demoed a few myself just to get a jump on things, etc.
This isn't scalable and that's what we're struggling with. We need to find better subs that are fast, do quality work, can source and pay for materials but are still affordable. The lesson here may be that we need to focus on higher ARV properties with more profit so we can be more hands off. Perhaps to scale up we can stay in the lower ARV neighborhoods but we need our own crew on the payroll?
Early next week we'll be fully inspected and should start to insulate and drywall. We'll update the blog hopefully this weekend as framing, rough electric and plumbing should all be done by today and we'll be able to show a clearer picture of the final layout.
@Troy Sheets Totally makes sense. How wide is the house?
I was at the FCA meeting last night and got some really good insight to how the zoning variance process works in our area. If you're keen on Brewerytown revitalization there's a bigger project coming to create kind of an entryway and W.Girard corrrider with unique signage and lighting. Crime and Punishment should be opening in the next 2 months. Neighborhood is really looking up.
@Account Closed do you know where I can find more information on the W Girard Ave revitalization project? Which organization is leading it
Thank you
I'm not sure who is running point for the project. The person I know most involved is Shahid Rana at the Fairmount Community Development Coproation.
Here's an old version of the project. Most of the to-do's suggested here are what they are working on.
@Account Closed thanks Tim. Related, there was a phillymag reference below:
""The city will finalize their plans for the much-needed cleanup and refurbishment of West Girard Avenue. Once completed, work (consisting of crosswalk, lighting, and landscaping improvements; new bike racks, trolley shelters, and signage; as well as “big belly trash and recycling bins at every intersection”) will begin next year."
Originally posted by @Troy Sheets:
If you'd like to follow along and watch as my partner @David Ross and I flip a Brewerytown row home, the link to our blog is below. I'll also post pictures and updates in this thread but I won't replicate what David has already done so well to date. He's the keeper of spreadsheets so I won't go into numbers too much but it's safe to say, we're in over our heads already. I *think* we'll get through this and make some (very little) money but there are no guarantees. The beauty is, David and I are very similar in our approach to this first flip; first and foremost, we want to put out a product we're proud of. Secondly, we won't feel we've failed if, once the flip is sold, we can break even. If we can get a free education from the school of hard knocks, sign us up. Obviously we went into this flip expecting to make money, and we still could, it's just never been our focus since day one. That said...DAMN it'd be fun to turn a profit!!!
Here are a few baseline numbers:
Purchase - $60k
Rehab budget - Initially $20k and 3-4 weeks, now scope has ballooned and we're at $40k and 2 months
ARV - Initially $115k, now $135k. We weren't going to move walls or finish the basement but, to compete and to offer a comparable product to others that have sold, we felt we must (so did our wives). There are a few sold comps that support this but, not on this exact block and Philadelphia is not just a city of neighborhoods, it's a city that can change drastically block-by-block and property values are no different. One block the wrong direction can be an easy $20k difference.
So, follow along, ask questions, tell us what we're doing wrong (and right, if that were to happen) and enjoy the show.
Is this a nice part of Phiadelphia? What type of buyers are you targeting?
Troy,
Love the site, good luck on the project!!! Good location too, I recently did a couple appraisals in the area and it looks like values are on the rise.
Originally posted by @Rob Randle:
Is this a nice part of Phiadelphia? What type of buyers are you targeting?
It's on the upswing and has a ton going for it. "Nice" is subjective but I live in Brewerytown and am also investing in it so I'm biased. There are plenty of great areas in Philadelphia to flip, buy/hold, etc. but I think Brewerytown is poised to explode over the next two years. The amount of development/improvement that's in the works makes it hard to beat. There's new construction and rehabs all over, values are climbing at a great clip but there are still hundreds of boarded up/vacant properties to be had in prime areas.
Originally posted by @Jamal Pitts:
Troy,
Love the site, good luck on the project!!! Good location too, I recently did a couple appraisals in the area and it looks like values are on the rise.
Thanks Jamal! I've seen vacant lots near my house go from $8k-$20k a few years ago to now (asking anyway) $100k. There's a ton of new construction underway and as these start selling in the $400k range these lots (the prime location ones at least) will start commanding those types of prices.
Originally posted by @Rob Randle:
Is this a nice part of Phiadelphia? What type of buyers are you targeting?
Sorry Rob, forgot to answer the second part of your question. The typical buyer I've seen for these remodeled homes are first time homebuyers, usually either hipsters or young professional-types.
Good luck @Troy Sheets , always a good thing to see this amazing city grow
Here's a good site for major construction plans in the city, hopefully to help when looking for areas http://forum.skyscraperpage.com/tags.php?tag=philadelphia
Originally posted by @Brian Yost:
Good luck @Troy Sheets , always a good thing to see this amazing city grow
Here's a good site for major construction plans in the city, hopefully to help when looking for areas http://forum.skyscraperpage.com/tags.php?tag=philadelphia
Brian, that site is awesome, thanks!
Originally posted by @Troy Sheets:
Originally posted by @Rob Randle:
Is this a nice part of Phiadelphia? What type of buyers are you targeting?
It's on the upswing and has a ton going for it. "Nice" is subjective but I live in Brewerytown and am also investing in it so I'm biased. There are plenty of great areas in Philadelphia to flip, buy/hold, etc. but I think Brewerytown is poised to explode over the next two years. The amount of development/improvement that's in the works makes it hard to beat. There's new construction and rehabs all over, values are climbing at a great clip but there are still hundreds of boarded up/vacant properties to be had in prime areas.
Would you consider the area where your flip is in a prime area? What areas do you think are good to buy and hold? I'm curious because I am considering investing in Philadelphia
Originally posted by @Rob Randle:
Originally posted by @Troy Sheets:
Originally posted by @Rob Randle:
Is this a nice part of Phiadelphia? What type of buyers are you targeting?
It's on the upswing and has a ton going for it. "Nice" is subjective but I live in Brewerytown and am also investing in it so I'm biased. There are plenty of great areas in Philadelphia to flip, buy/hold, etc. but I think Brewerytown is poised to explode over the next two years. The amount of development/improvement that's in the works makes it hard to beat. There's new construction and rehabs all over, values are climbing at a great clip but there are still hundreds of boarded up/vacant properties to be had in prime areas.
Would you consider the area where your flip is in a prime area? What areas do you think are good to buy and hold? I'm curious because I am considering investing in Philadelphia
For buy/hold, I think it's got the right mix of reasonable prices, potential appreciation and rent rates. Obviously appreciation is never guaranteed but I think you'd be hard pressed to not catch some appreciation in Brewerytown over the next few years. Again, there are lots of areas that fit this criteria in Philadelphia, I just happen to have chosen Brewerytown. I feel strongly that you should pick a small area and get to know it really well. Visit a few areas that tickle your fancy or you've heard good things about in Philadelphia and narrow down your options by your gut feeling and conditions you see. Your bound to "click" with one area over another. Once you're comfortable in that area and know the values well, you'll have an easier time pulling the trigger.
What's your criteria for buy/hold?
Here's a great example of why getting multiple quotes is important and, sometimes the standard three quotes isn't even enough. @David Ross and I have been getting drywall quotes for well over a week (maybe two) at this point as we decided that using handymen for this much drywall was a recipe for disaster. They'd be able to hang it with no problem but the finishing, well, there's nothing like a crew coming in and hanging and finishing 40 sheets of drwyall in a couple days. My handymen would be a couple weeks putzing around with that much finish work, especially since it's a LOT of patching in, and, to be honest, neither was jazzed about doing that much hanging and finishing.
We budgeted $4k for drywall, labor and materials. I thought this was high but David has done his research on costs and has been pretty accurate thus far. First quote? $3800. Next quote came in at $3700. David is smirking at this point. Then we got one at $5500! David almost kicked the guy out on the spot so he "came down because he really wanted to work with us" to an even $5k. We had one guy that just wasn't interested in our little rehab (we could tell from body language and attitude) and he never bothered to send the quote. Last quote and the guy we were going to go with came in at $3500. That was four quotes and, besides the one outlier at $5k, all exceptionally close in price. The last drywall contractor let us know he also paints. I have a great painter lined up that I've worked with closely in the past but I'm always interested in getting more quotes and comparing costs, so I asked him to provide the paint as a separate quote. He said he'd send it that night. He'd already given us a verbal quote on drwyall and since he was the lowest, had a great attitude, asked all the right questions and had the right answers, etc., he had the drywall job as far as we were concerned. The paint quote he was going to send that night? He never sent it. He also didn't return our calls for several days. He finally got back to us a few days later with the paint quote and apologized for the delay. He was busy he said.
We had one more recommendation that we hadn't called because frankly, we were sick of talking to drywall guys and with the quotes all coming in so close, we didn't have a lot of hope that we'd save much money anyway. After the last guy was incommunicado for several days, I called the last recommendation I had. He showed up on time, very nice guy, and had a solid reference from a resi/comm GC I know. His quote? $2300!!! I couldn't write a deposit check fast enough. The only catch is he can't start for two weeks. We can pick away at some other odds and ends this week but, because it took us so long to find a drywall contractor, we're going to lose a full week. Luckily our holding costs on this place are nominal and, the longer we take, the further into the Spring prime time sales territory we go so, while annoying, not a disaster.
To be fair, the $2300 quote isn't quite apples to apples as this guy doesn't want to do the minor touch up work the place needs to be paint ready. He's got a production-oriented background and crew and does lots of new construction and commercial work, he doesn't want to mess with filling holes from pictures and TV mounts of prior tenants. The other quotes were paint ready, fixing all the dents and dings throughout. It's fine by me, my painter won't miss a beat and the cost for him to prep the existing stuff will be a few hundred at most. The painter will have plenty of time to prep too since we're sitting on our hands for a week...
As @Troy Sheets mentioned, getting a drywall team together has turned into more work than expected. The drywall works consists of:
- All of the basement areas we are finishing (6'x6' bathroom and 12'x16' basement)
- First floor where we've made runs for plumbing and electric,
- Second floor about half of the walls we've moved, plus ceiling patching in most of the rooms for where the walls were moved.
This came to about 48 sheets of drywall, or 1,534 sq. ft. In drywall work, quotes are done by square footage or cost per sheet. However, there's always a bit of economies of scale where smaller projects will cost more per sf than larger projects. We were expecting quotes to come in at around $40/sheet, which would be around $1920. So yeah we were a bit frustrated when all of our quotes came in at $3500+.
Troy finally found a respectable quote from an experienced crew - so at least we can get rolling with that.
*****
One funny thing I'm noticing - when I show up dressed for my professional job and meet with contractors - my quotes come in higher. When I'm looking like Daddy Warbucks contractors feel like they can raise rates and I won't notice.
Note to self: keep jeans, boots, and a used Eagles hoodie for a quick change of wardrobe. Keepin' it real!