All Forum Posts by: Brian Cooke

@Sean Cole I appreciate and welcome the input! What would your scope of work been for 25k and would you use a general contractor or act as the GC yourself? I got a quote from a GC that was 25k labor only, and another quote that was 33k including material (which is the one I picked). But I ended up adding some stuff and other things came up (the expected unexpected).

Update: the house is now listed on the MLS. Here is my current financials on the property, if I sell for full asking price. Zillow Link I learned a lot and the next house I think I will have a much better idea for what I want to get done and what it will/should cost, and get a better profit. I would have like to do more outside, with the landscaping/curb appeal, but I would have guaranteed no profit. As a result, I don't think I'll have people falling over each other trying to get an offer in, but I am getting a good number of views on the house right now so I will hopefully get someone who doesn't mind the outside so much. I'm still satisfied at this point for my first property, even if I have to sell for a little less.

So this is fun...I didn't think to ask the contractor about permits. Newbie mistake. The prices have all been no permits. If i want to list the house as 2 full baths, I will need to have that also reflected on the auditor site, and that requires permits. Contractor says that's going to be a few grand extra. They said most people they work with don't want them to pull permits because it is cheaper and faster. The inspector will also probably ding me on stuff the previous owner did.

Thanks for the input @Nicholas W. That's what I'm going for. Turns out that I wouldn't be able to do an electric anyways, because it would load the panel too much.

@Dean I., I plan on bringing contractors out to houses that I find through my own mail campaigns, but for ones that I'm looking at from wholesalers, realtors, etc, the houses are gone by the time I get a contractor out to look at it. I had to move fast on this one, and based my estimates off of previous estimates I'd gotten on other houses. I got bids on this one during the inspection period, and probably should have tried to renegotiate, but I didn't.

Seems like there is going to be a lot more labor with option B, due to the plumbing stuff that will go into the way things are placed in the master bath. And you have to walk through the closet to get to the master bath, so that makes the closet smaller than it seems. Personally, I'm not a fan of that. 

If houses without a master bath are still selling, then I'd probably go with option A, advertise it as a guest suite. I'm not sure about your cost estimates, but for option B being 3 times the cost, will it get a similar 3x increase in ARV over option A?

So to finally get to where I'm at now...

I forgot to mention before that the previous owner had redone the master bath already, diy style, so it had nice floors and a new shower, but the vanity and toilet still need replaced and he didn't do a great job on the shower. The surround and tub didn't quite reach the wall so he put in 2x4s to stick out enough for him to attach the shower/tub. See the left side of the picture below. I don't have the budget to redo that shower, so we decided to corner bead it. 

Here's the corner bead. Doesn't look too bad, but definitely unusual.

Demo work is done, they have expanded the half bath and installed the tub. As I mentioned, they patched around the shower. Walls are all patched, and paint primer is being applied. 

Some of the things that came up: 

• some black mold was revealed after kitchen demo, on the drywall where the kitchen meets the master bath. It wasn't a lot, but decided to rip out that drywall and replace: $200 added
• the shower fix wasn't noted in the original estimate, so... $500 added
• I decided I wanted more cabinets in the kitchen, so added a kitchen desk to the plan. Extra cabinets and granite: $1120 added
• knew the garage door opener needed to be replaced, and the bracket that pulls the door re-attached, but apparently the door material is vinyl so it was broken in a way that required a new door: $760 added.
• The water heater vents through the area that we had to use for adding plumbing to the now-full bath. The water heater was fine, but now has no-where to vent. Need to decide whether to replace with electric (requires running electric all the way across the house), or replacing with a power vented water heater (more expensive material but less labor).

On the bright side, the contractor says he is ahead of schedule and will finish in a couple weeks!

Photos of current state

@Kyle Burnett @Sean Cole

It's in the Forest Park area, and I'm using a general contractor for the whole thing. I would take too long to do it, if I did anything myself. And I'd probably have to do stuff twice, :D

I know some contractors that could do some of the work, so that I wouldn't have a GC for as much, but it seems worth it to me to just let the GC handle everything so I don't have to worry about coordinating schedules.

I have had a couple deals lined up before, that fell through last minute because I was trying to use Hard Money lenders that would be all positive, until a week before closing coming back to say based on their internal appraisal they wouldn't be able to loan as much, basically undercutting the AS-IS value so that I would have to make a larger down payment and make it less risky for them. I wasn't about to go through that again. I was recommended a local bank that does a lot of real estate investor loans. Talked to them, and it was very attractive. 20% down on the total loan, purchase + rehab. Interest only payments, 8.5%.

Started the application, they said they weren't so sure about the ARV. After I sent them the comps I used, they agreed. The loan was approved in a week, but only 27k for rehab which is fine.

Well, I purchased the house and then hit my first snag pretty much immediately. The final cheapest bid from a general contractor was 34k (that's not the snag). Started working on the contract for the work, and he wanted 1/3 up front. 1/3 halfway through, and final 1/3 at completion. I had read that I shouldn't pay the contractor up front, so I was thinking that would work just fine with bank draws. I didn't really have much choice. It was pay him or go to one of the other contractors who would probably want upfront as well. But I didn't really have 1/3 of the rehab in the bank. (That's the snag)

The solution was to go to a credit union and get a $20k unsecured line of credit. Found one that was a surprisingly low interest rate of 6.75%. Most other places I looked were 10 or 11% minimum. Got approved for the line of credit, and got the contractor the initial payment. The time period the contractor gave me was done by spring, so I figured I'd be able to pay it down enough in a month to be able to make the next payment as well. 

Probably should have started this earlier. I’m a few weeks in, but I’ll split the post up so that it flows a bit better than a giant long read.

Been getting all sorts of RE education through biggerpockets and my local REIA for a couple years. Last year I spent basically the whole year trying to find a deal. Finally bought a rental at the end of the year, turnkey. Then almost immediately found a good deal for a rehab project. I figured I had enough money to finance a rehab project for a quick return. Purchased at the beginning of this month.

The deal:

3 bed 1.5 bath tri-level home. Asking price 70k. ARV: hope for 130k, expect more like 125k.

Rehab is all cosmetic, plus new HVAC and A/C.

• Redo the kitchen, leaving the floor.
• Remove dividing wall between dining room and main room.
• Remove carpet, refinish all hardwood floors.
• Expand half bath into the neighboring closet to make a full bath. (The full bath was in the master bedroom, so the two other bedroom's occupants would have to go through the master to go take a shower)
• Replace all doors, lights.
• Paint interior

Estimated cost 30k. Using MAO 70% - rehab formula. MAO is 57k, which wouldn't get accepted, based on talking to the realtor. Ended up offering 64k, which gives me a good chance of still making a decent profit for a first flip.

They accepted the offer.

Next post about the financing aspect.

Photos here Google Photos

I have given her a deposit only debit card so she can deposit at the bank down the road. In case of eviction I can cancel the card to avoid her depositing anything to delay the process. There's still a risk of partial payment before the eviction process, but I guess that won't stop an eviction.