Newbie: Another Rehab in the Books (With Pics & Numbers)

[Cory Iannacone]

This is my second rehabbed property, which was just completed today (and listed today).  So, the jury is still out on whether or not this can officially be considered a success story.  Let me know what you think.

I purchased this duplex in mid-September in a historic district in Harrisburg, PA. Unit #1 was a very large 1 Bed / 1 Bath which the owner just rented out for $775.  Unit #2 was a very large (2 floors) 3 bed / 1 bath, which was vacant and needed some work.  Current owner was looking to try to get $1,000 for unit #2 if he kept the house.  I purchased the house for $119,000.00 with $3,000.00 seller help to offset some closing costs.  

I completely updated Unit #2.  Also I added an additional bath to make it a 3 Bed / 2 Bath.  Each floor in unit #2 has its own bath and very large bedroom. 

I am out of pocket $27,000 in rehab costs.  Most of that money went to Unit #2, however, some went to exterior common maintenance.  I just listed Unit #2 for $1,330.00.  So, what do the numbers look like?:

Purchase Price:  $119,000.00  ($3,000.00 went to seller assist)

[Potential] Gross Rent Revenue: $2,105.00

PMIT: $909.00

ARV: $170,000.00

Rehab: $27,000.00.

[Cory Iannacone]

Jody Schnurrenberger Dennis Del top lessons learned:

1) a good contractor is extremely valuable. I️ once heard someone say pick 2 out of 3: 1) price, 2) work quality and 3) timeliness. This contractor on this second project was referred through my realtor. Small business and he had 4/5 guys working for him. I️ did interview contractors through craigslist , which is what I️ used on my first rehab, but I️ think a good referral is the way to go. I️ had to fire my contractor from my first project because he just bailed on the project and I️ kept trying to work with him. It really drugged the project out longer than necessary. First rehab was about 6/7 months because of issues with my contractor. This second project was knocked out in a month, and I️ ended up renting it out that same week. And delay would have put me into the holiday season, which I️ think would have delayed renting the place out.

2) I️ used basically all the same materials from 1st project, so I️ wasn’t reinventing the wheel. When I ordered material for second project, I️ just went into HD with sku #s and quantity and the order was done. Saved time shopping materials.

3) it was very helpful to be only 15 mins away from property on second project. I️ visited the second project every day while construction was happening. The first project was 1.5 hours away. I️ couldn’t visit as often, which I️ believe contributed to the delay for project 1.

4) one of my bigger screw ups for project 2 was I️ didn’t measure the door width before purchasing appliances. Got an awesome deal on appliances, but they wouldn’t fit on delivery day so they all had to be sent back. I️ spent that day at Lowe’s coordinating the return and getting new appliances ASAP because this was at the end of completion of project.

5) if you’re rehabbing, I️ recommend ordering carpet measurement and material very early—as soon as you closed. Takes a couple weeks to install, unless you do 72 hr carpet. But 72 hour Carpet was not as good of material and cost more money.

6) because this lease started nov 1, I️ asked for an 18 month lease so that I️ would be in prime rental season (spring ) when it expired—April 30. Helps me get a new tenant in if they done renew in 18 months. If they renew, I’ll ask for a 1 year lease. Renting during holiday season is not optimal.

7) always buy new tenant gift card to local nice restaurants for move in gift. Start relationship on right foot to show you care. They said, “wow. You are a great landlord. You know how to treat a tenant.”

I’m sure there’s more. But that’s what initially comes to mind.