Home rebuild Investment property - 112 S Joyland Ave. Durham, NC

[Matthew Christman]

Investment Info:

Small multi-family (2-4 units) buy & hold investment.

Purchase price: $75,000
Cash invested: $165,000
Sale price: $380,000

Complete Gut out renovation, basically the only thing original to this house is the exterior brick and foundation. Refinished into two 3 bedroom 2 bathroom, 1600 sqft. apartments.

Currently rented out for a total of $3000 a month

What made you interested in investing in this type of deal?

It needed to be completely gutted, the more a house needs the more I like the deal

How did you find this deal and how did you negotiate it?

found on Zillow, negotiated through my realtor

How did you finance this deal?

Hard money loan

How did you add value to the deal?

completely rebuild the house and split upstairs and walkout basement into their own apartments

What was the outcome?

a fantastic cashflow rental property that I will likely keep for a long time

Lessons learned? Challenges?

very challenging to find good contractors and GCs in the area. Durham inspections department had a lot of little things to learn how to deal with and make work, this experience definetly made for a good start in Durham and will help dramatically in future projects in Durham.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My realtor Jonathan Taylor Smith with Blue Chariot was great to work with and is an investor himself, making him an ideal contact to have as a newer investor

[Matthew Christman]

@Michael Jackman, I am happy to share that info

The project lasted just under a year from closing to refinancing. over half that time was just waiting/holdups.

-2.5 months organizing and waiting for the city to approve drawings and release a permit: I learned the Durham city rules and what they were all looking for in this type of full renovation project and how important it is to have a full set of engineering prints made up asap after buying a property

-2.8 months of waiting on contractors to pass inspection: it amazed me how many contractors don't bother to show up to meet the inspections guys when they come out, so there was a lot of this is what it says on paper, but the real problems were not getting fixed, this resulted in a lot of failed attempts to be inspected. I now show up to all of the inspections and get the real information from the inspectors, a lot of the time I could fix things while they were finishing their inspection and was able to pass right away.

-3 months to finalize refinancing options: this was a very stressful process that could have been very easy and quick if I understood how the banks went about refinancing and different types of bank's capabilities. I realized the sales guys that want to do a bank loan for you will say almost anything to get your business, but if they are not used to working a certain type of situation it will be painful and expensive just to find out that they can not do what they said they could. This resulted in my credit score taking a massive hit and having to refinance the original way I thought I was going to and now taking a higher rate than I would have it I just went with it in the first place.

The construction itself was pretty easy for me to manage as I have been working on houses for years, but finding good contractors that I could trust to do the work right and for what they say they can do it for was challenging. Everything had added costs and change orders by the end and even when they finished up the work there were plenty of little things to be refinished and made to look nicer. contractors were often blaming the others for not being able to continue work, but they were all waiting on each other and wouldn't want to come in for a day or two so the others could continue their work. Managing these contractors you would think would be done by the GC, but the GCs don't care about how long they are taking while every month that passes you take on more holding costs and often GCs are trying to use the same contractor at several other projects at the same time, and blaming the individual contracts for taking so long when in fact the GC is pulling them in five directions at the same time telling them not to work on your project because another one is more important to them.

I did not invest more than a couple of hours a week at first, but halfway through I left my W2 job and started to manage the whole project myself and was on-site at least 10-25 hours a week, this allowed me to learn much more along the way. The project likely would have taken another 4 months if I didn't take charge and start managing it myself.

There were many other good lessons learned during this project and I definitely have faith that with all I have learned the next Durham rebuild will go much more smoothly and likely take half the time to get done. I am also likely going to get my GC license this year so that I don't have to pay someone else to do what I was doing for them. This isn't for everyone, but with my engineering and construction background, it makes sense for me.