My First Duplex (from 12/2017) - Fire & Foundation Damaged

[Jonathan Taylor Smith]

Investment Info:

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

Purchase price: $85,000
Cash invested: $97,353

Duplex on Lee Street in Durham... Front (A) Unit had extensive fire damage, which appeared to start in lower half-bath, burning out that section and covering everything of both levels with a thick black soot. Back (B) Unit had extensive foundation damage causing multiple cracks in the slab (as much as 2 inches wide) that also extended into the Front (A) Unit, and sloping at the back right corner that could be both seen and felt when walking through the kitchen. The doors and windows on the back right side of the building were non-functional due to the slopping. And most of the interior doors, plus many windows and toilets were apparently intentionally broken.

The start of this project was to remedy the foundation issue, which was done by Carolina Foundation Solutions by digging out the complete back and right side of the foundation and adding 6 helical piers to jack up and stabilize the foundation. They then injected foam to fill gaps and further raise the foundation a total of 5 inches while adding more pressure to the helical piers. Finally they sealed the cracks and my contractor later applied floor leveler to ready for flooring.

With the foundation issue resolved, my contractor removed all the fire damaged wood, cleaned up all the soot and began a general rehab of all remaining issues. We even installed a french-drain and retaining wall to help prevent a return of the foundation issues. It took a few months, but it got completed as an excellent rehab to rental and has been steadily rented. Best of all, it was a perfect BRRRR deal, where I got 100% of my money back out (plus PROFIT) - for an infinite ROI!

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

Around this time in my REI progress, I was seeking more involved rehabs - for greater resulting profit.

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

I found it on the MLS (you could still actually do that easily back then) - and it had been listed for more than 30 days. I was already a Licensed Realtor myself back then, but I allowed another agent to represent me here, as I was leaving for a cruise.

How did you finance this deal?

I financed this purchase with a Hard Money Lender.

How did you add value to the deal?

It was a pretty extensive rehab... Fire, Foundation, Plumbing & Sewer, Appliances, Lawn, etc...

What was the outcome?

The outcome was that upon cash-out refi, I was able to get ALL of my money back out, plus a substantial PROFIT. With no money left in the deal, my ROI is not effectively infinite. The full project outcome is detailed at: https://www.bluechariot.com/rehab-813-lee-unit-a/ & https://www.bluechariot.com/rehab-813-lee-unit-b/

Lessons learned? Challenges?

This property sits below street level, so it requires a sewer-pump to get the waste up the hill - and that pump caused some problems and added expense. It can also become clogged if the tenants flush inappropriate material or items. There has also been some additional settling of the foundation.

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

I can certainly recommend my Hard Money Lender and Mortgage Broker. PM me and I'd be happy to do so. I haven't had the opportunity to work with either agent again. I've also not worked with the GC again, but not due to any issues on this project.