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Updated over 8 years ago, 04/01/2016
My First Rehab: A Duplex - Fixed, Refi'd and Rented !!
A few months ago I was pretty confused on whether to pick up a Duplex that'd been on the market for almost 6 months without any takers http://www.biggerpockets.com/forums/88/topics/1630...
The inside of the house was not in the best of shape and there was no way we could pick up this place conventionally. Due diligence revealed that the place needed a serious rehab (roof, toilets, electrical, flooring etc.). So here's what we ended up doing- The before and after pics will help paint a better picture of the transformation:
- Property: 155k and 1600 sqft. in Washington County, Oregon
- Financing: Hard Money (estd. interest only monthly payments of 1.6k)
- Fix-up Budget Estimate 23k (before purchase - our plan was to do a lot of the rehab ourselves and save money): Roof-16k, Painting (Interior+Exterior)-1k, Electrical-1.5k, Flooring (Carpeting+Refinish Hardwood Flooring)-1k, Bathroom-0.5k, Misc. Labor-2k, Landscaping-1k, Misc Materials-2k
- Actual Fix-up Expenses 39k: Roof-13k, Painting (Interior+Exterior)-0.5k, Electrical-3k, Flooring (Carpeting+Vinyl Flooring)-1.8k, Bathroom-0.5k, Misc. Labor-10k, Landscaping-2.5k, Misc Materials-8k
As you can see the difference between the estimated and actual budget was filled with lots and lots of learning :) which I'll try to summarize here:
- It's always good to get multiple bids for roofing or any contracting work in general. Our bids varied from 8k to 18k. The more contractors I spoke with the more I learnt what questions to ask
- Unforeseen expenses did crop up as they always do. Like its been said in many posts, a contingency fund is always a must
- Our plan was to get the place fixed and rented in 10 weeks. It ended up taking us 5 weeks longer
- We learnt how to fix walls, toilets, install flooring, painting etc. All this gave us an idea of time and effort required and helps us judge fix up budgets and repair quotes better. Remember that before this the only thing that I could successfully fix in the house was a light bulb !!
- More than luck, money or real estate, this game is about people. We were very lucky to meet good people that helped us through each step of this process. We've made good friends and understood the value that we are adding to the community (previously this home was the blight of the neighborhood with a very shady tenant history).
In the end, we fixed up the place to one of the much better homes in the neighborhood. Got the place refinanced to a conventional mortgage and now have renters in the place. Our monthly mortgage payments are now 1k and the monthly rents are 2k. We still have some bills to pay on our credit cards and home depot loans (probably get done with those in the next couple months). This property however has given us a excellent insight on something we had never done before (hard money, rehab, contractors, handymen etc.) giving us an excellent insight on how we can move forward from here and things we can do better !!
Gives me some encouragement! Thanks!
I have to admit, I couldn't help but smile when seeing these before and after pictures. It is very inspiring to see the work you have put in and the result you got out. Im sure it was well worth the completion extension toward the back end of the rehab.
I have a couple of questions about your rehab and finance decisions:
As far as the finance portion, Im trying to make sure that I understand why you chose to use hard money for the purchase and rehab. Was it because you needed extra funds to put into the rehab that other financing options would disapprove? If so, was FHA/FHA 203k not an option?
How much did you come out of pocket for your refi? Was a conventional loan not an option when originally purchasing the property because of the amount of work that needed to be done? Would the bank have considered that property an investment and required you to make a bigger down payment (25% or more)?
Sorry I have so many questions. I plan on purchasing a duplex before the end of this year. Im trying to do as much research as possible so that I can get out of the analysis paralysis stage.
I love BiggerPockets!! I dont know where Id be without it honestly
Is it just the way the pictures were taken or did you do something to the brick siding in order make the color pop in the after pictures the way it does
Very well done! Great work, man!!
@Siddharth Shastri Thanks for sharing, looks great and gives me great motivation. @Shaka Farrier great questions, I would be interested to hear as well as I am in the same spot as you and hoping to get off of analysis paralysis very soon!
Thanks so much sharing this. Congratulations. Forge ahead!!!!
@Siddharth Shastri, job well done. Awesome strategy with utilizing the hard money to get into this dell. I actually just met with my Mentor a week go we discussed me using this same strategy to get into a multifamily property. @Shaka Farrier, great questions. To answer the one question regarding FHA/203 K money, I was informed by my lender and realtor that I would have to live in one of the units as my primary residence in order to use FHA Financing. I could see that being the reason for him utilizing the hard money at this time to get into this deal.
That's awesome. Getting inspired.
@All: Thank you so much for the encouraging responses. I'm really glad you've liked how this turned out for us
@Shaka Farrier: These are really good questions and I'd be happy to answer them for you. (1) As @Courtney Merricks has mentioned, I couldn't use the FHA 203k loan as this was going to be an investment property and not my primary residence. (2) We ended up putting in 4.5k out of pocket during the refi to a conventional loan (3) A conventional loan needed us to put in ~35k upfront and then put in more money to fix up the property. We didn't have that kind of money at that time. Using hard money allowed us to pick up the property instantly with very little of our own money down and then put in only the money needed for the fixup and the monthly hard money payments - which we could manage more easily. (4) Brick siding is usually very durable and all we did was do 2 rounds of pressure washing to get it to look like that (note that another reason why the photos look good is because they were all taken from my wife's iPhone @Pragya Singh, she's very proud of it :) )
Hope these help and I'd be glad to help answering any more questions. Have a great day ahead !!
-Sid
Originally posted by @Siddharth Shastri:
@All: Thank you so much for the encouraging responses. I'm really glad you've liked how this turned out for us
@Shaka Farrier: These are really good .questions and I'd be happy to answer them for you. (1) As @Courtney Merricks has mentioned, I couldn't use the FHA 203k loan as this was going to be an investment property and not my primary residence. (2) We ended up putting in 4.5k out of pocket during the refi to a conventional loan (3) A conventional loan needed us to put in ~35k upfront and then put in more money to fix up the property. We didn't have that kind of money at that time. Using hard money allowed us to pick up the property instantly with very little of our own money down and then put in only the money needed for the fixup and the monthly hard money payments - which we could manage more easily. (4) Brick siding is usually very durable and all we did was do 2 rounds of pressure washing to get it to look like that (note that another reason why the photos look good is because they were all taken from my wife's iPhone @Pragya Singh, she's very proud of it :) )
Hope these help and I'd be glad to help answering any more questions. Have a great day ahead !!
-Sid
Thanks for your help Sid. I appreciate you clarifying your decision making process. I am probably going to owner occy since it just me and owner occupying does not both me much.
I have been comparing the pros and con's on FHA/FHA 203k vs VA Loan (which I am currently eligible for). I am thinking FHA may be a better option because I will be able to acquire the funds for repairs at the same time of purchase. I'm not sure though I do have 10k-5k in cash saved up right now. Should I keep it in my reserve and use the banks money or use it for repairs.
This is fantastic! Really shows how some elbow grease and determination can turn a piece of coal into a diamond. Way to go! I'll be following this post so as to use it as guidance for when I buy my first duplex!
Awesome! Very inspirational I must say.
Congrats... :)
Congratson the duplex! That's great work.
Keep posting your journey in real estate, very interesting!
Best regards,
Kevin
Thanks for sharing, fun post to view. You did an amazing face lift!
That's a heck of an accomplishment. It takes a lot of guts to do what you did.
I'm sure there were a few people around thinking you were crazy for taking on a project like that. But you took it on and made it happen anyway. My compliments!
It's a very empowering and satisfying feeling, isn't it?
The lessons learned on this one will serve you well on the next one. And I have to say, it looks like you made very good use of my absolute favorite "curb appeal" tool of all time ... RED MULCH!
Congrats My Friend!
That's great. Congrats!
Originally posted by @Siddharth Shastri:
@All: Thank you so much for the encouraging responses. I'm really glad you've liked how this turned out for us
@Shaka Farrier: These are really good .questions and I'd be happy to answer them for you. (1) As @Courtney Merricks has mentioned, I couldn't use the FHA 203k loan as this was going to be an investment property and not my primary residence. (2) We ended up putting in 4.5k out of pocket during the refi to a conventional loan (3) A conventional loan needed us to put in ~35k upfront and then put in more money to fix up the property. We didn't have that kind of money at that time. Using hard money allowed us to pick up the property instantly with very little of our own money down and then put in only the money needed for the fixup and the monthly hard money payments - which we could manage more easily. (4) Brick siding is usually very durable and all we did was do 2 rounds of pressure washing to get it to look like that (note that another reason why the photos look good is because they were all taken from my wife's iPhone @Pragya Singh, she's very proud of it :) )
Hope these help and I'd be glad to help answering any more questions. Have a great day ahead !!
-Sid
Thanks for your help Sid. I appreciate you clarifying your decision making process. I am probably going to owner occy since it just me and owner occupying does not both me much.
I have been comparing the pros and con's on FHA/FHA 203k vs VA Loan (which I am currently eligible for). I am thinking FHA may be a better option because I will be able to acquire the funds for repairs at the same time of purchase. I'm not sure though because I do have 10k-15k in cash saved up right now. Should I keep it in my reserve and use the 203k. MIP is a cash flow killer
@Siddharth Shastri Thank you so much for sharing this! I too am about to embark on my first investment/first home/house hack. Currently, all I can really do is change a light bulb as well! I know there will be some growing pains initially...but nothing worth having is easy, right?
Congrats on a job well done!
Originally posted by @Michael Hart:
That's a heck of an accomplishment. It takes a lot of guts to do what you did.
I'm sure there were a few people around thinking you were crazy for taking on a project like that. But you took it on and made it happen anyway. My compliments!
It's a very empowering and satisfying feeling, isn't it?
The lessons learned on this one will serve you well on the next one. And I have to say, it looks like you made very good use of my absolute favorite "curb appeal" tool of all time ... RED MULCH!
Congrats My Friend!
That's absolutely right. You should have seen the place before we put in the Red Mulch (Nuggets). With a weed fabric underlay, this thing has required almost no paintenence :) for the past 4 months !!
Originally posted by @Erika C.:
@Siddharth Shastri Thank you so much for sharing this! I too am about to embark on my first investment/first home/house hack. Currently, all I can really do is change a light bulb as well! I know there will be some growing pains initially...but nothing worth having is easy, right?
Congrats on a job well done!
Certainly there will be pins and in the end you'll see that it's all worth every bit of it.
Good Luck on your first investment !!
