If you’ve seen case study 5, this one will look really familiar. A Realtor brought us this deal before it hit the market. We purchased it and case study 5 at the same time. The Realtor knew the guy who was selling the properties. He honestly thought these listings would be a nightmare and he was dreading having to go to the “bad” part of town. We really love this side of town and see it’s potential, so we jumped on it really quickly. This one was definitely more work than the other property we bought in the neighborhood, but it’s been a good property.
Offer + Negotiations
The seller was offering a price that worked, so we paid him what he wanted to get it locked up. We didn’t want to risk losing a good deal over greed.
We bought this property for almost no money down with a commercial loan from Regent Bank. We wrapped the rebab into the loan. Since we didn’t have a lot of cash invested we didn’t do a refinance on it. If we would have ended up with more change orders that may have influenced us to refinance sooner.
We are publishing this case study almost 2 years after we finished this deal. Since we bought it the area has seen a fair amount of appreciation and would likely refinance for closer to $80,000 or so. It’s possible we will refinance this property in the coming months. We prefer to refinance deals at one time to save on fees, so we’re waiting on value to improve on a couple other properties before we move forward with that.
Project Start: 8/12/2019
Project Target End: 9/16/2019
Project Actual End: 9/20/2019
Tenant Move In 11/1/2019
We expected this to take 5 weeks, it took 7 weeks and 4 days. We ran into some rotted wood and faulty plumbing. Since this wasn’t part of the original scope, we were delayed a couple weeks. We go into more detail below.
Original Scope of Work
- Remove carpet, padding and tack strip throughout
- Sand, stain and poly approx. 940 sq ft of hardwood flooring.
- Note: If upon removal of carpet there is signs of damage to hardwood that will require fixing then that will be considered an add on.
- Repair drywall and texture walls as needed
- Paint walls/ceilings one color, paint base, case, doors and all woodwork another color, paint fireplace white
- Remove all bars from the windows
- GFCI: install GFCI receptacles in all rooms. This house is on a two wire system and there are three prong receptacles throughout. They are not grounded so they were changed back to a two prong receptacle. We installed one GFCI receptacle in each room so there is a three prong receptacle.
- Note: there are other options but will cost more.
- Replace ceiling registers as needed
- Install flush mount satin nickel contractor packs throughout
- Install mini blinds
- Demo tub and tub surround
- Install new tub, white subway tile tub surround and faucet
- Remove medicine cabinet and install mirror
- Remove all extra hardware from walls, ceiling and trim.
- Install smoke detectors and a carbon monoxide detector
- Demo shelving between entry and kitchen, peninsula and cabinets above it, dated trim above kitchen window
- Sand, primer and paint kitchen cabinets
- Install hardware to kitchen and hallway cabinets
- Remove counter top and install a formica top
- Install white subway tile backsplash
- Install kitchen sink and faucet
- Repair subfloor to laundry area
- Tile kitchen/laundry with a large tile
- Redo laundry hookups and drain, install in wall in a washer box and repair dryer vent, reuse washer/dryer combo if working
- Install LVP flooring in entry area
- Replace exterior fixtures
- Remove awning
- Install new mailbox
- Install satin nickel raised house numbers
- Remove all extra wiring around house
- Repair moisture damage and seal.
- Repair cracks in mortar anywhere where water can intrude (no painting)
- Remove tree from front of house.
- Repair railing boards that are loose
- Cleanout and haul all debris from shed
- Upgrade electric service to the house: replace panel outside, turn in inside panel into a junction box, and move those circuits to the exterior panel
- Install condenser, line set, and A coil
- Demo handicap ramp
Change Order 1: New Drains and New Subfloor $2,950.00
I refer to this change order all the time when talking to investors… especially newer investors. When we bought this property I was still personally visiting the property, ordering a third party inspection and having a contractor out before purchase. Even so, things popped up. In the kitchen the boards were rotted out under the sink. We’d planned on just replacing the bottom piece of wood in a couple cabinets. When we got that ripped out, we learned that all of the flooring and sub-flooring was totally rotted out. We also learned that this is because of a shoddy patch to the plumbing, which was leaking water all over the place. All of this was totally hidden from me, the inspector, and the contractor. No one was negligent, no one missed anything. Sometimes things just come up.
- Replace all water lines
- Replace all drain lines
- Cut out plywood kitchen floor to replace piping then replaced
- Cabinets fell apart during plumbing and flooring repairs, replace all bottom cabinets
Change Order 2: Repair Flooring $650.00
After removing carpet from bedrooms 1 and 2 we learned the floors were in bad shape. We had to cut out floor, replace and install new carpet. Additionally, we had to completely demo the bathroom sub-floor. It was rotted out underneath the existing tile. Again, this is something that was totally hidden to the naked eye. The floor wasn’t soft, it didn’t bend under our feet when walking on it, and there was no active moisture detected. But when we finished demo we found rot. We installed new plywood so the new tile would be on solid sub flooring.
Change Order 3: Upgrade to Granite Counters $0.00
Our contractor found cheap scrap pieces so we got a free upgrade!
These notes are something this contractor added to the estimate as a courtesy. Most contractors will not add notes like this to warn you of possible change orders and/or cheaper alternatives. It’s important you know what you look for.
|Original Scope of Work||$28,495.00||$28,495.00||$0.00|
|TIMELINE (IN WEEKS)||5.0||7.5||+2.5|
|*ARV (AFTER REPAIR VALUE) IS DETERMINED BY THE SALES PRICE OR REFINANCE APPRAISAL|
|**RENT RATE IS THE RATE SECURED AFTER REPAIRS ARE COMPLETE|