Live-in Flip : Troy, Michigan - What do you guys think?

Question

Hello fellow BPer's,

We're looking at a house to fix-up here in Troy, Michigan

Does anybody have experience on live-in flips?

This is will be our first project, and it looks like a major rehab (pics below), we will definitely be using 203K loan to cover the work. I was hoping that the project would be a good chance to learn the rehab flow, and I get the bonus of a customized house when we're done.

Comp's in the neighborhood put the ARV at $270 to $280K.

We made an offer at 190K, and figured we are not going to hold it to the 70% ARV rule, since we need a house anyway.

The location is great; good schools, close to work, nice neighborhood.

The surrounding neighborhood has a good mix of older houses as well as some high end new construction on the same streets, so I think in two or more years we have a good chance of selling it for a decent price, and move on.

Sam Ball · Answer

@rob

@Rob Glover $50k will get you an OK kitchen and two OK bathrooms using a contractor and that's without any surprises. I see a wife and small child,do yourself a favor, If you do go through with it get a kitchen in there before you move in it will save you a lot of stress with the family. I have never done a live in flip but imagine it would be hard without a place to eat or cook. If there is only one full bath how will you shower when it is being remodeled?  I'm not sure what the asking price is but the possible buyers pool goes way down when the kitchen looks like that. You may want to offer less if it has been on the market for some time. Good luck.

Vicki Gleitz · Answer

We just closed on a HUD owner occupy house last week. Other than selling Avon, baked goods, and making jewelry, we are both technichly retired [ will finally have closing on our business next week after months of title problems] and since other than some new appliances, bathroom sink, and gas furnace repair, everything else is totally simple cosmetic stuff we can do in our spare time.[ we need to live there for a year anyway, and might choose to stay after that] We won't get started working on it for a few weeks because we are getting our Bennett house ready to sell, but when we do, we only intend on making the kitchen serviceable, and the living room nice before moving in [ the bathroom works fine, but eventually we need to get rid of its' all pinkness other than a brown tub!

Off the subject, but this home was built in 1930 and is a tri level house. I had no idea tri levels were even built back then.

Steven Gesis · Answer

Rob, good advice and very realistic view on cost!

Steven Gesis · Answer

Rob, I would advise getting a baseline mold test complete in these spaces, should be inexpensive maybe $100-$150

You do not know if the company performing the mitigation and mold rendition used a viable protocol, bank owned homes, since they are really checked by the actual asset manager, they could have just applied kilz and never applied a proper biocide/mold inhibitor and possibly did not use a proper sealant. Also, check the home disclosure documents. Again, I am not certain but based on my experience I can be certain with over 90% assurance there was an existing moisture issue that lead to a mold problem, this is the aftermath of the mold rendition.

Rob Glover · Answer

Steven,

Thanks for the heads up on possible mold issues. The basement is also covered ceiling to floor in the same white coating, even the studs. I couldn't really figure out why, maybe covering some past moisture. We are definitely planning an inspection; do you think mold/ moisture issues would be detected even if they are covered  up like this?

Rob Glover · Answer

Maybe the term 'gut' is a little too strong. There's only one interior wall on the first floor, framing the kitchen area. Since the kitchen is non-existent, we hope to remove the partition wall and bring the kitchen all the way to the exterior wall for a big open layout.

Also, there is no flooring. The second floor rooms are in decent shape, but needs flooring also. We are renting now, and plan on completing the major work before moving in. I don't think we could get by with no kitchen or working bathroom for too long. haha

Steven Gesis · Answer

Hi Rob-

Congratulations for taking the plunge, great approach, this could be a great move for you, the live-in flip, is not that big of an obstacle, just prepared to be a little uncomfortable as you proceed. You used the term Full Gut - but only showed the kitchen as you referenced your budget @ $50K, can you expands a little more.  When you say full gut, you intend on taking apart the entire home to stud?

This is a full gut, I am currently working on for a client. We literally went ot stud on the entire home.

If you are only referring to a kitchen and (1) maybe (2) bathrooms followed by carpeting in the home and painting yourself, you can probably squeeze by with $50,000.00

Also, the pictures of the kitchen exhibit past mold issues/concerns, the white overspray on the studs is common in cases where you have had moisture issues leading to mold. Be cognisent of this and make sure you conduct a mold clearance at completion, or even on the front end to check the condition the home now, so you can address it during your construction phase.

Mindy Jensen · Answer

Live-in flips are difficult. The house is a mess and you don't have much control over that. If there is a room that doesn't need much work, or could be put off until the end, then you would at least have a place to go and get away from the mess.

If you have small children, it's even more difficult.

ARV of $90k above what you're paying for it, then topping off with $50k of work gives you a very slim margin. Factor in holding costs and commissions when you go to sell and there's not much left. If you're living in it to avoid capital gains, there really won't be much by the way of capital gains to tax.

The three pictures you shared didn't really show much, except it needs a new kitchen. You say gut rehab, but I don't see why it has to be gutted...

Rob Glover · Answer

Thanks, Larry,

Since it would be a 203K loan, the work is required to be done by a 203K contractor.With no experience in my belt at all, I was just wondering how far 50K would go on a complete gut rehab like this.

I was interested on any past experiences for live-in flips?

Loved it? Hated it? Too much work?

I would be happy to break even, and I will walk away from the deal if the construction bid comes in too high.

Larry Turowski · Answer

@Rob Glover Too short on details.  I'm suspecting you are only factoring in the cost of materials in your rehab expense.  Include labor, even if you are doing it yourself.  If you figure you'll break even in the worst case scenario, then at least you've paid yourself for you labor.

Live-in Flip : Troy, Michigan - What do you guys think?

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