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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.
Here's a great comp for our project, it's one block away and identical in layout and scope to our project. They did a great job on this one so I'm hoping we put out as nice a finished product. It still blows my mind that you have to put hardwood, granite, stainless, finished basement, etc. in a $150k house...
COMP
Good luck the rest of the way @Troy Sheets& @David Ross . The website looks great and I can't wait to see how it turns out!
I've been considering Brewerytown or West Philly near the 52nd St corridor as potential neighborhoods to attempt my first deal. I see a lot of cheap lots in Brewerytown especially.
Did you guys consider buying one of those and building new, instead of rehabbing this property? What cons, if any, do you see in buying & building on an empty lot in Philly?
Originally posted by @Chris Fisher:
Good luck the rest of the way @Troy Sheets& @David Ross . The website looks great and I can't wait to see how it turns out!
I've been considering Brewerytown or West Philly near the 52nd St corridor as potential neighborhoods to attempt my first deal. I see a lot of cheap lots in Brewerytown especially.
Did you guys consider buying one of those and building new, instead of rehabbing this property? What cons, if any, do you see in buying & building on an empty lot in Philly?
Thanks Chris! David can answer the lot/new construction question better than I can but I can tell you the cost to build a SFH on a lot in most of Brewerytown isn't feasible relative to the sale price. If you buy a lot now in a hotter part of Brewerytown off the MLS they're wanting $100k. The houses just aren't selling for enough to recoup that cost and turn a profit. If you were smart and bought these lots a few years ago at $20k, you're in good shape. I'll let David expand on this as he's more of a new construction junkie than I am. If this is your angle you'll need to buy a lot ahead of the curve, in an untested area, then build once the development reaches you or just find a screaming deal on an off-market property.
It's probably like this in most areas I'd imagine, once a nice rehab or new construction happens on a block prices go through the roof...usually. My luck, prices would drop!
Hi @Chris Fisher and welcome to the BP community.
The empty lots you're seeing for $15-30k on the MLS are overprices and should be more like $10k. New construction costs run about $120-160/sq ft. The sales comps are just not there yet on these small lots, small single family homes (1,000 sq ft) are selling around $130-200 fixed up depending on the block. Once the homes start selling for closer to $250-300k you'll see new SFH construction.
One method we've started to see in the works are small multi-family buildings, so you can pack three (800 sq ft, 2-bed) units onto one lot, and sell each for $150k or so... That's like a 2500 sq ft house for $450k which is more in line with new construction in Graduate Hospital and Fishtown. Just something to think about...
That's great information, thanks @Troy Sheets & @David Ross .. If I did go the lot/new construction route I guess I could rent the home until the prices appreciate to that 250-300K range and then sell. Hopefully 3 years or so. (I know it's not always smart to bet on appreciation, but I feel like Brewerytown is a good bet). I like the multi unit building idea also..
Any idea what rents on a newly rehabbed 1000-1200 sq ft go for in the area? And at what size is a lot too small to work with?
Originally posted by @Chris Fisher:
That's great information, thanks @Troy Sheets & @David Ross .. If I did go the lot/new construction route I guess I could rent the home until the prices appreciate to that 250-300K range and then sell. Hopefully 3 years or so. (I know it's not always smart to bet on appreciation, but I feel like Brewerytown is a good bet). I like the multi unit building idea also..
Any idea what rents on a newly rehabbed 1000-1200 sq ft go for in the area? And at what size is a lot too small to work with?
That's not a bad plan as long as you can have that capital tied up for 3 years. I'd be one and done till I could sell or refi so it wouldn't work for me.
Check rentometer.com for rents, as with most things in Philadelphia, it's block by block. Depends on bedrooms too obviously. In my MFH I'm getting $1150 month for a ~1000 sq ft 2br with a roof deck. You'd get more for a SFH and quite a bit more if it were 3br and nicely done.
Hi! I'm new to BP and found this thread while searching forums. @Troy Sheets I'm happy to hear you're rehabbing in Brewerytown! Hopefully I'll soon be starting on a block nearby - just got the houses under contract. It's not easy being the first rehab on a block, but it sounds like you're taking all things into consideration when making your decisions. Your photos look great and I can't wait to see the finished product. Good luck!
Originally posted by @Renee Gambacorta:
Hi! I'm new to BP and found this thread while searching forums. @Troy Sheets I'm happy to hear you're rehabbing in Brewerytown! Hopefully I'll soon be starting on a block nearby - just got the houses under contract. It's not easy being the first rehab on a block, but it sounds like you're taking all things into consideration when making your decisions. Your photos look great and I can't wait to see the finished product. Good luck!
Hey Renee, welcome! What block? If you ever want to see our project let me know, it should start shaping up nicely after this week as drywall is finally underway.
Are any of you digging out basements to get to the desired headroom?
Originally posted by @James Kendrick:
Are any of you digging out basements to get to the desired headroom?
The place we're flipping now had it done already and, on most flips, it's common to do in this area. It's expensive finished space but it's what the market demands and with these smaller row homes it does make sense.
Cool project, thanks for sharing. I've had my eye on Brewerytown for a while now. Definitely up and coming, but I've worried that lack of subway access will cap future development (though the trolley could be a huge help).
Philadelphia on the whole is on the up! DNC coming in, the pope's stopping by, Comcast Center 2.0, the list goes on and on!
@Troy Sheets They're on the 1300 block of Marston.
I'll check with you before stopping by next week, but I'd love to see it.
Originally posted by @Renee Gambacorta:
@Troy Sheets They're on the 1300 block of Marston.
I'll check with you before stopping by next week, but I'd love to see it.
Great block, once the Milk Depot gets rehabbed that block will be awesome!
Originally posted by @Renee Gambacorta:
@Troy Sheets They're on the 1300 block of Marston.
I'll check with you before stopping by next week, but I'd love to see it.
There was quite a bit for sale on that block including a couple vacant lots, they're pending too, is that you as well or did you buy the houses that were in the estate?
Blog is updated, drywall is all hung and finishing should be complete tomorrow. Looks like another slow week coming up though, my painter can't get here till the following weekend and the lead carpenter/handyman that is doing the lion's share of the work had a death in the family out of state and just left this morning. Multiple lessons here...least of which is not to rely on one person for an entire flip. Another I've stated before is holding costs; I wouldn't want to muddle through a flip in this fashion using HML or with a huge mortgage and taxes or, worse yet, both. The holding costs on this place are probably $500/month tops. Opportunity cost, that's a whole other story...
Thanks for following along everybody!
@Troy Sheets Just the estate houses. I did see the lots but only looked into the zoning and thought about them. I probably should've moved faster...
Originally posted by @Renee Gambacorta:
@Troy Sheets Just the estate houses. I did see the lots but only looked into the zoning and thought about them. I probably should've moved faster...
Yeah, same thoughts here! Good luck, let's get together soon, let @David Ross or myself know if you need anything.
Drywall is complete. The main contractor we've been using, a guy and a helper, has been out of town for the last week due to a death in the family. He has other work he picked up and committed to before our job that he was working on while drywall and paint were/are happening on our project. If we wait for him it'll be another 1-2 weeks before he gets back to our job. Paint was scheduled for late this week and to be finished by Saturday, and he was supposed to pick back up Monday at the latest. He's still out of town, with a friends house torn apart, and most of a week of work ahead of him there. He was also projecting 4 weeks to finish.
That doesn't work for us so we hired a GC with crew last night. They'll start sometime next week, possibly as early as this weekend. They project 3 weeks to finish. It's costing us more in labor but will save quite a bit of time not chasing separate subs. Besides losing a week waiting on the plumbing inspector, all our other lost time has been spotty scheduling on our part. I had painters and a few other subs lined up and @David Ross and I were going to pick at a few of the smaller items on the weekends. I threw every single item I could think of at the GC and got a pretty competitive price. It's going to cost us a bit more, maybe $2k total this route, but that's not counting our labor on the odds and ends stuff.
Budget is holding up pretty well other than the ~$2k hit for the extra labor. Fingers crossed, in another week I'll be able to update you with some real progress...
Looks great so far!
Fun update, the contractor we signed with the other night called yesterday and asked if we were 1099'ing him. We said of course we were and it was even in the Craigslist post as a requirement along with being licensed and insured. "Oh" he says, "then I need to charge you an additional $1200 to cover taxes"...
We're interviewing another contractor today. I should write a whole other post on the fun of dredging Craigslist for GC's. I put a scope of work on the CL post as well as pictures, our requirements, size of the house and square footages relating to flooring, finishes we were going to use, etc. and, to save some time, asked the contractors to give me a ballpark range of what they thought the job would cost labor only since were supplying materials. I got estimates from 1 week and $3500 to 6 weeks and $20k. We were resigned to paying around $9k in labor to finish. The two contractors we felt were half-decent both came in at $10k. We went with the best of the two and that's where we were at till yesterday.
The post on CL was up for 24 hours till I had to pull it, I had well over 40 responses in that time frame. Lots of desperate people out there and they'll tell you what you want to hear and many, once you get them talking, will tell you what you don't want to hear from a "GC". It ranged from "I can borrow all the tools I need to complete this job" and "I've got a buddy that needs work, we'll knock this out for you" to "I do decks and painting but my uncle is a retired carpenter, he'll do a nice job on your cabinets and I know a guy for flooring, not sure about the bathrooms and tile but I'm budgeting $2k in labor to complete your bathrooms, I'll find someone to do it".
I'm also surprised at the number of angry emails I got when I asked for a ballpark range on the job. I understand it's not going to be terribly accurate without seeing the job but, if you don't want to give a range, why bother emailing to tell me how stupid I am or why no self-respecting GC would give you a range without seeing the job? I definitely didn't want to meet 40-some contractors in 1-2 days when I knew 90% would be a waste of my time and theirs. Onward and upward!
Funny story, @David Ross reached out to the original GC we used on this property for plumbing and electric rough-ins, just to say "Hey, here's what we have left scope-wise and here's what we have left for labor, interested?". He's on board to finish out the project at our price, starting Wednesday. Couldn't be happier to have him on board to see this to the end!
Will be interesting to see what this ends up selling for...
http://philly.curbed.com/archives/2015/03/02/first-look-twobedroom-in-brewerytown-asks-260k.php
Originally posted by @Ethan Giller:
Will be interesting to see what this ends up selling for...
Wow, that will certainly set a new benchmark for 2br comps in Brewerytown (depending on what it sells for), at least in that area. It's a block or so behind my personal residence and probably 3-4 blocks from our flip. As you know though, 3 blocks may as well be 3 miles in this part of town!
Awesome progress so far! Looking forward to following this flip. Hope to be joining the Brewerytown flipping crew soon. Best of luck!
Great project! Good Luck! Great site!