I bought my first property (duplex) back in June of '18 via the "House Hacking" Method Purchase price was 90k with an ARV of ~130k. My initial Rehab/ repair budget was 15k. Goal was to get the work done and cash out refi or heloc, pay off rehab debt and to purchase another property by this summer '19 also by house hacking. I'm currently in it at 18k with about another 8k of work left. All 18k has been on %0 interest credit cards that start to come due March of 2020. Total rehab is reaching 26k and Not much room left on the credit cards. Also my ARV isnt where I though it would be, now around 115k. 90k purchase + 26k rehab =116k I'll essentially be getting back what I put in (fingers crossed), however Im lost on what move to make next and when to make it. If I try to refi or heloc now I know my appraisal is going to be low considering the work I still need to do, but I'm having a tough time coming up with the extra 8k to move forward on repairs which is unfortunately pushing me further away from the initial goal using a refi or heloc to pay off the rehab which I've financed on 0% interest cards. I know hard money is an option but it's a scary one. I'm also known for taking risks 😆 Any advice from the community is greatly appreciated. Just incase you were curious about the numbers: My mortgage is $750. Tenant pays $630 + gas, Electric, water and sewer I pay trash and lawncare

@Carlos Vega I have been in this spot before. I will tell you the most important thing for me was just going to the property and working every day. Some days that was just cleaning up. Others I was working on a small project. Material is usually inexpensive. Just keep your nose to the grindstone and keep at it. Someday it will be done. My first major project was out of money within a month. I had to let go the folks working for me and learn how to do everything myself. I bought the tools, got on youtube and figured it out. I had a lot of growing pains but the house turned out great! Another time I tripled my 100k budget. I was mad and frustrated because the seller did not disclose a ton of material defects with the property. After about 6 months of not sleeping and being angry I pulled up to the property hours before anyone else. Sat in my car and cried. At the end of it I told myself, “Kai you own this POS, stop feeling sorry for yourself and get to work.” From that day on it got better. I have friends who have become discouraged and taken breaks. Those have lasted weeks, months, and years. Keep working!

@Carlos Vega When you are going over budget or approaching it I'd look at it as a way to reevaluate your process and how you got there. Could you have avoided going over budget whether it was through managing contractors better, getting better pricing on materials or something else or was it due to something unforeseen like a leak in the pipes that did not show up on inspection. For example, if I buy a home that is winterized in Michigan I automatically assume there is some plumbing issue and I alot 5k which is rare it's that high but it makes sure I don't get caught on the wrong side of a surprise as this happened to me once. If it looks like we are going over budget starting out then I would start to do the work that I could do easily to save money which in most cases was demolition, painting and flooring. For that reason I often could save 4-7k on that alone and stay under budget. At this point I'd look at the work that needs to be completed and ask yourself do you have to complete it and what can you do to get by, or put it this way will the higher level finish you want get significantly more return than settling for something lower especially considering your cost to hold or the cost of the improvement because you may accrue interest or another convenience check fee. Do you need grey cabinets when white is slightly cheaper, do you need to replace the bathtub with tile when you can reglaze white. If you are seeing a trend you should be consistently reevaluating your flip and your budget to see where you are at.

@Carlos Vega You're not in horrible shape and I think you'll come out ok. Tough it out and you'll be tougher on the other side of this.

@Carlos Vega wondering how your situation panned out. I'm in the early stages of our first BURRR renovation and we're predicting that we'll exceed the original budget by at least 1/3....mostly due to our failure to recognize things that really needed to be addressed (e.g., HVAC, plumbing) as well as the enormity of the project exceeding what time we thought we could contribute to the actual work.

When your rehab starts to go over budget...

Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

7y

What do you have left to do for renos? Can you finish what you started and rent it out leaving any other renos for later once you've built up your cash reserves? If you'll get $650 for rent and your mortgage is $750 (hopefully including property taxes) PLUS you are living in the home, the extra cash will help.

I know hindsight is wonderful. It helps to keep track of the budget as you go, so when things start to go over, you can go to plan B and start cutting projects.

When your rehab starts to go over budget...

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