All Forum Posts by: Corby Goade

Depends on the area and type of system you want. We typically pay somewhere in the range of $3500 for a new, basic furnance, including install, if there are no other modifications to the system required. 

Quote from @Beau Wollens:

Hey Everyone,

I am an extremely novice real estate investor looking for some advice on an opportunity I have on the table. I have the option to buy a 1,300-sqft 3-bed, 1.5-bath house in South End neighborhood of Stamford, CT, from a family member before it goes on the market. The past tenant was a hoarder and the apartment has not been lived in or touched since 1999 (26 years)! 

I have been told by a contractor that the foundation of the building is intact, so it does not need to be torn down but requires a "gut renovation down to the studs." After some research online, I am reading that the cost per square foot on a gut renovation of this nature in Stamford CT is anywhere from $150-$350, which is ultimately not very helpful, because at $150 per sq ft, this is a very appealing project with a total profit of ~$175K (46% ROI) and at $350 per sq ft, it very much isn't, because it would be a net loss of 83K (haha).

QUESTIONS:

What can I do refine my estimate a bit given that I am not allowed to a formal inspection on the property? 

Can anyone share a breakdown or budget for a similar project in a similar area? What were the biggest line items? How does this number breakdown? 

What are the largest pitfalls one may run into that turn this from a 150 to 350 ordeal? Is this price differential largely a matter of how high-end you make the finishes? Or is it other factors? 

Does the cost per sqft account for electric and plumbing? 

If you are familiar with this area, any further recommendations or resources you are willing to provide, I am super grateful. 

Here are the numbers I put together. Feel free to share any thoughts you have here as well.

 Welcome! Very cool that you are analyzing a deal that might work for you. As you mentioned, that expense range is not super helpful. 

Are you under contract? Why wouldn't you be able to have a formal inspection? 

You don't need to save up $100K or quit your job today in order to become a successful investor. 

I started 23 years ago and bought my first property with 3.5% down using an FHA loan. I had to borrow the down payment form my parents because I was BROKE.

I still have that house and it's bought me at least 5 other properties. No, it wasn't a home run deal, I didn't get it sub to (interest rate was 7.625% PLUS MI). I just bought a house that I could afford, did what I could to create equity and tried to repeat that process when I had an opportunity. Simple, reasonable action and patience. 

Now I own a thriving property management business, run a real estate team helping other investors learn how to grow and scale their portfolios, I have my own modest investment portfolio and have two development projects going at the moment. Sure, I work. I work more hours than I ever did as a W2 employee, but it's FUN. I never wake up dreading my work day, as a matter of fact, I look forward to getting to work every day. 

If you want to hear a bit more of my story, I was a guest on the BP podcast and there's a little more context, you can listen here.

I've made ALL of the mistakes. Every thing you read in these forums about rehab, contractor and landlord mistakes, I've done it. Because I did everything wrong, started with basically nothing and STILL achieved financial freedom, I know for a fact that anyone can do what I did. 

What are your next steps? AMA. 

 You can question all you like, but if the unit isn't actually working and you do nothing, that's not cool. It's your job as a landlord to respond to these things in a professional manner. 

In addition- if it's not working and the tenant takes legal action, the judge certainly isn't going to be on your side when you tell them a flooring contractor said it was warm in the house.

This game is all about mitigating your risk by being proactive. It'll be well worth the $150 service call to know that you aren't going to end up in court. 

And if it isn't working and you have a family in there on Christmas without heat...I mean...That's not very nice. 

You can't have it both ways. You'll get a better deal in the winter, but it'll take longer to rent. If the market was busy, you wouldn't get a good deal. 

The amount you'll save off of the purchase price will be significantly more than what the vacancy will cost. Small potatoes. 

I always look back at the previous year, and without fail, the best deals we get are in December and January. 

 A plumber said the furnace was working? What value does that have?

It's the middle of the holidays and you own the property. Hire an HVAC contractor to go check it out, of course. 

The fact that you think the tenant is a pain has nothing to do with how you maintain the property, you could be creating legal and maintenance problems for yourself by not taking action. 

November through February is the worst time to rent in most of the country. Sounds like you are on the right track in offering incentives. 

You should also be well versed in the local vacancy rates and how they effect your unit and turnover times. 

How does a landlord make you pay too much for a property that you signed a lease on?

Don't get me wrong, there are plenty of terrible landlords out there, but deciding that you are victim of life's circumstances certainly won't improve your situation. 

 I don't think that's the point- although @James Wise isn't known for subtlety. 

Sub to deals are risky for the buyer and typically provide little to no value for the seller. 

If they need to reinvest, how does sub to help them accomplish that goal? Also, wholesale deals off of the MLS are typically a waste of time for all parties.

Totally agree. I'd rather pay more for quality properties in desirable areas than lose money every month on a deal that looked good on a spreadsheet.