All Forum Posts by: Benjamin Larance

Great job!  My electrician wouldn't open the tool box for $375.

Best of luck on the next one!

I agree with all the other posts - great project and tastefully done.

But I can't make the rehab numbers work.  For example, a quick "back of the napkin" conceptual estimate (WAG) suggests the following:

1. Appliances (dishwasher, refrigerator, stove, hood):  $3,500
2. Kitchen sink, disposal and faucet:  $500 (material only)
3. Kitchen hardware:  $200 (material only)
4. Kitchen cabinet restoration:  $3,000
5. Kitchen countertop restoration:  $1,500
6. Plank flooring:  $3.50/SF x 2,000 SF = $7,000 (material only)
7. Electrical rehabilitation (including light fixtures):  $4,000
8. Plumbing rehabilitation (including toilets, faucets & shower):  $3,000
9. Bathroom tile (2 baths):  $5,000  
10. New roof:  $10,000
11. New siding:  $6,000
12. Paint (outside):  $4,000
13. Paint (inside):  $5,000
14. Staging: $1,650

TOTAL:  $54,350

This estimate does not consider any cost associated with building permits or design professionals.  There is no money for demolition or mold remediation.  There is no money for any foundation repair or drainage improvements.  There is no money in my WAG for new doors or door hardware.  There are no dollars assigned to new HVAC equipment or a water heater.  No allowance for stair (treads and risers) or handrail rehabilitation.  No allowance for insulation or other thermal improvements - such as upgraded windows.  No money dedicated to moving or eliminating interior walls.  No allowance for garage door replacement.  No allowance for new landscape, privacy fencing or flatwork rehabilitation.  
 

I could not have accomplished the level of renovation you show for the dollars expended.  Am I missing something or do you get REALLY good rehab pricing in your area?    

To Bill S.

Thank you for the thoughtful comments.  

I am hopeful your analysis of the market appreciation in my little neck of Arvada is correct.  Keeping a close watch on the area, I don't see evidence that such is the case.  

Yes, I need to plan for larger margins.  One sure method of achieving this goal is to take off my architect's hat off, which is REALLY hard to do.  

I am a flipper.  I don't have the stomach for being a landlord.  Yes, holding this property with the amount of cash I have invested is truly a mistake.  That said, I am committed to my tenant, who also happens to be my wife's boss, until the end of the lease.  

After that, I am ready to go again.  There is no loss of appetite.  Cannot remember when I have had so much fun!  Just need to take all of the valuable feedback I have received and parlay it into some profits.

B       

To Eric James:

Market is not falling, just fell from what proved to be my overinflated estimate of my project's ARV.

I bought the house with the intention of selling the completed project for $450,000.  This is the exact sales price for an identical home on a less attractive street one block over from mine.  Two months before completion of my project, two other homes (within walking distance and similar floor plans) came on the market.  

Both had been renovated in the same manner as mine.  Both sat on the market for over 6 weeks before selling at reduced prices - 1 for $430,000 and 1 for $435,000.  

I have said to myself, if push comes to shove, I can unload mine all day long for $425,000 as my renovation is a slightly higher quality than any of the other three.  Meanwhile, I can recoup a bit of the renovation cost while the market gathers itself for another run at higher prices.

My first fix and flip became a buy and hold rental - unexpectedly.  The renovation took a month longer than expected.  Sales prices for similar homes in my selected area peaked and began to fall before renovations were complete.  A trusted colleague, in the midst of a divorce, asked if he could rent the property.

The first lease term is nearly complete with almost no issues over the course of a year.  I am near certain there will be a request to extend lease term for an additional year.  

Things could be worse.  

All of the renovation costs were paid out of pocket.  Property cash flows a modest $100/month.  I build equity at a rate of approximately $500/month.  The property value of this $425,000 single family residence in a NW suburb of Denver, CO increases by a conservative 1 -2% per year. 

I enjoyed my first renovation and look forward to doing another, but so far, my method is flawed.  Too much money locked up in the property. Need to find ways to accelerate the business.

Ideas?

I am about to start my first fix and flip.  I have spoken to a private money lender who is interested in my project.  I will provide "out of pocket" money for the renovation (30 - 40K).  He will provide 100% financing for the "as is" property.  He requires the renovation money to be held in escrow. 

I am not necessarily opposed to this stipulation but wanted to ask my colleagues in the industry if there are pitfalls associated with this strategy that I am not considering.

Benjamin (Benji) Larance