I can tell you that for some of my flips I'll gut the bathroom..based on how outdated it is and how poor the layout is.

i understand about using all the expenses to help offset the income generated by the property, then with depreciation, you may end up in a "paper loss" position for the year....which depending on your W2 income, may be deductible.  

They send a paper check in the mail.

Otherwise the layout would make little sense (1000 sq ft is more than a new bed and bath, I assume LR/kitchen/DR are being increased as well).  

It's possible even for a commercial deal to look great on paper, and to end up being a complete failure due to mismanagement or an unseen disaster.

Note investing is a whole specialty in-and-of itself, but for those who know how that's done, they are dealing with the notes (paper side) of these same pre-foreclosure properties. 

It is tough to work on layout with gutted pics.

Suzanne B. there are a couple of steps to consider:1) Removal of the old radiators, pipes, and boiler (I've repeatedly (3 times) had this done for free by people who want the scrap)2) Installation of the furnace, trunk, and plenum (five times, cost of furnace plus $1k in labor/mats)3) Installation of ducts (depends on the type and length of ductwork needed, put I bet in your case it won't be too crazy)4) Installation of returns (same possibility as #3)In my experience ... for #3 and #4 it depends a LOT on the layout of the house, and how often the people you hire have done the work.  

Did the contract lay out specific milestones and a payment schedule for each of those milestones? 

It was a summary of a World Bank paper on the commonalities between the most competitive mid-sized cities worldwide.