All Forum Posts by: Mariqus Alexander

Over the years, I’ve gotten better at creating a budget that can actually be met.  I used to create a budget with the hopes of everything going smoothly.  After performing more the 30 plus rehabs, I’ve learned now to expect everything to go wrong.  But even with this, sometimes there are issues that pop up which you don’t expect.  Below are a couple of items I’ve run across.

Gas Leak

This is one that use to always catch me by surprise.  Why?  Because usually, I buy a property from someone who occupied the property and the gas service was on, so I would assume everything is working properly.  So how is it discovered?  Well, usually I call the gas company and transfer the service in my name.  But occasionally, if I know it may be a few weeks before I start rehab, I will let the service be terminated and turn it on just before the appliances arrive or sometimes even after I’ve put the house on the market to save on utility bills.  However, when this happens, the utility company will perform a pressure test before activating the service.  If the pressure test fails, you will find a lock on the gas meter.  Usually, this is not a cheap fix and more importantly, you hope the repair is outside of the house since the rehab is or near complete.

So while this is still something I haven’t caught in my initial budget, I now instruct my plumber to perform a pressure test before rehab begins on every property.  So if there is a leak, I can catch it early in the process and possibly look for ways to cut other expenses to still have a chance to stay on budget.

Sewer Line Leak

This is another tough one to budget for.  It’s one you usually can’t catch during your initial inspection of the property.  I know some rehabbers here in Texas will just make an assumption in their budget for the sewer line to be replaced if the house was built before a certain year.  The reason they pick a year is because galvanized pipes were used on most houses built before mid 80’s.  In that case, they will replace the whole sewer line with PVC.  While this is great practice, PVC sewer lines can also have leaks at the connection points.  This can be a very expensive repair, especially if you discover it after the rehab is complete and tunneling is required.  

Again, this is where having a handy reliable plumber can help you discover this early.   You should have a hydrostatic test performed early on or even before the rehab begins.  You still won’t avoid the expense, but the earlier you catch it, the better chance you have in making other adjustments to reduce the impact on the total budget.

These are two which I always had trouble with and now spare a small expense upfront to help me determine if I need to make some changes to my budget.  

Investment Info:

Single-family residence buy & hold investment in Mesquite.

Purchase price: $137,500
Cash invested: $34,000

Property located in a hot first-time buyer and rental market. The purchased price gave us instant equity of $40k.

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

Located in a great area of town not far from downtown Dallas. It was a large 4 bedroom 2 bath we knew would lease quickly.

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

A couple we had purchased a home from before who was slowly liquidating their holdings called us to buy this one. They understood we were discount buyers from our first deal with them and just wanted to close without going to market, so we they gave us a great price from the start. So we didn’t even negotiate and paid the asking price, which was a great price!

How did you finance this deal?

Paid cash initially so we could close quick and then refinanced after leasing it.

How did you add value to the deal?

The house was a 3 bedroom but had a formal living in the front of the house. So we converted that to a 4th bedroom which increased our rental amount.

What was the outcome?

The house was rehabbed in 3 weeks and leased it to one a son of one of our investors who is in our fund.

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $89,000
Cash invested: $13,000

Property owner couldn’t afford the maintenance required for this property. It was located in an area where properties don’t come available often and is a great rental area not far from downtown Dallas.

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

Once I looked at the numbers and saw the potential to cash flow a close to $300 a month, it met my criteria.

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

My wife was talking to a family member who is also a realtor and told him we were in the hunt for deals so if he had one, give us a call. He called a week later with this lead. I offered the asking price with the contingency of a roof and foundation inspection. The owner claimed the roof on their insurance and had it replaced before closing.

How did you finance this deal?

Used hard money to purchase and rehab. Once it was leased, I refinanced the deal and left about 13k in the deal.

How did you add value to the deal?

Rehabbed the property and made it nice for a rental in that area.

What was the outcome?

Leased the property within a week of completing the rehab.

Lessons learned? Challenges?

This one was pretty straightforward (thankfully) so there wasn’t many challenges or lessons learned on this one.

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

No, I’m a realtor myself so I handle all of my deals.