Check out my first deal and show me why I'm wrong or should move forward

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Check out my first deal and show me why I'm wrong or should move forward

Ben Reiss
Wholesaler · Newark, DE · Member since 2011 · 50 posts · 4 votes

Looking at a place and active comps put ARV about $135K-140K. Sold Comps put it at about $125-135K, but those weren't really updated. Place is a 3/1.5 built in the early 1900's. has updated funace, hot water heater, 100amp panel (looks like a small bit of knob and tube was left in), new carpet downstair.
Roof needs to be looked at since their was a leak (seller said it was fixed but I don't think I trust his maintnace guys), some small issues with brickwork I will be getting a estimate on later in the week. figure about $1500 for roof work and flashing fix and another $1500 for the brick work (mostly some re pointing a small area and a couple little things)
Now the place needs:

New kitchen(small)- tile floor (have the 18'x18' travertine that IO got for a steal), cabinets, countertop, appliances, lights ($6K)

New half bath-tile floor, vanity, toilet, lights ($1500)

Back stairs re done ($1K~1500)

Open stairs to attic and turn in to hatchway and use floor space for closets ($1K~1500)

Sub floor repair upstairs (stiffen a bit and fix 1 hole) ($750)

Carpet Upstairs (700 sqft) ($1K)

Upstairs Bathroom- Tile floor, Tile tub srround, build in tub since it is a corner tub now, toilet, sink, ect ($3K)

Paint and some drywall/plaster repair ($4K)

Fix 3'x8' second floor deck off Master BR-railing and some clean up ($500)

Fence backyard and some landscaping ($3K)

Misc $2K

call it about $27K in rehab to make it nice and well in the top of the comps.
I could also do less but was looking at making it shine and moving it quick.

I figure I have to get into it at low 60's, Owner owns free and clear. Will hold the note and owner finance. I have not talked exact numbers with him yet (but is open to somewhere around that) since I don't have a solid idea on exit value with regards to how much of a rehab would be needed.
other strategy is it would rent for about $1K/ month now and for about 1200-1400 with a small investment in rehab.

This will be my first rehab where I am not doing all or most of the work and also in the city. Do my costs seem about right for you guys on rehab cost or am I just going off the free labor (well my labor ) that I had on other work. I am trying to figure out wilmington De a bit more but still not 100% on ARV and rent figures.

Thanks
Ben

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  • Keith Lutz
    Real Estate Agent · Hackettstown, NJ · Member since 2011 · 206 posts · 62 votes
    14y

    Hi Ben,

    That is great. I am new around here, so I am just taking a stab, but I would say at 65% of 125k (lowest comp) is 81k, then I backed out 30k for repairs, I come in closer to 51k. So to me your MAO should be around 52k?

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  • Ben Reiss
    OP
    Wholesaler · Newark, DE · Member since 2011 · 50 posts · 4 votes
    14y

    Thanks Keith, I'll keep that in mind and adjust my bid. Do these number seem about right. I want to do a lot of the work myself but that would mean pushing back till the summer when I'm not teaching. But I am trying to make sure my numbers include paying someone to do the work so my labor is not free.
    Ben

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  • Justin S.
    Residential Real Estate Agent · Chandler, AZ · Member since 2009 · 1k+ posts · 928 votes
    14y

    What is the square footage? Has plumbing and electrical ever been updated?

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  • Ben Reiss
    OP
    Wholesaler · Newark, DE · Member since 2011 · 50 posts · 4 votes
    14y

    electric has mostly been updated, new panel and service cable. some old circuits and a small bit of knob and tube. looks to be maybe 2 circuits. and they are in the basement so honestly not sure why they weren't pulled out other than the guy didn't want to spend extra money.
    Plumbing has been updated to the main line leaving the house as all PVC. only the main sewer line is still black iron.

    House is about 1400 sq ft
    downstair living area already has new carpet as do the stairs. up stairs needs to be done in the bedrooms. tile in the kitchen and baths. does have washer dryer hooked up in the basement too but needs the stairs re worked. they covered up the back stairs up to floor from kitchen. I would turn those into a better set of stair to the basement since I would have room for a landing and a slightly longer run so not as steep. (that was set in along with getting rid of stairs to attic, and making a closet with pop top access at about 3K)

    Going to get another realtor's ideas on ARV and get something solid. Going to get a GC in to give me some firm numbers on the work also. was going to sub a lot of it but think it might be worth the GC to make sure it gets done on schedule and have a solid budget.

    I honestly just need to make sure not to over do the rehab. I could see myself putting too much money in since it is a cheap area. need to make sure not to over do it. I could do a "ok" rehab for cheaper that might still get me the same price.

    I am going over tomorrow with a friend who does more work on building new construction in temple area that I dealt with on another project for my long term hold on campus.
    Hope that answered the question, any more ideas or comments please post away. I am trying to punch holes in this so I make sure not to make a mistake. figrue if I can't it's prob a good deal.

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  • Vincent D.
    SFR Investor · IN · Member since 2008 · 137 posts · 24 votes
    14y

    Ben,

    When it comes to repair work, be robotic. Don't get gushy over "making things shine". Chances are, your tenant base won't know the diff b/t a $1000 item vs $500, for instance. If it is new and functional, it is also suitable, provided you are not investing in a pristine suburban area. Broad repair lists are also opportunity to build in nice cushions, but don't neglect to leave a row for contingency and unforeseen costs, invariable to an extensive renovation job.

    Above all, make sure the repair product is commensurate with the neighborhood and tenant clientele. Varying somewhat depending on your exit strategy, it doesn't have to be the best house in the neighborhood to achieve your goals.

    Remember - be a machine. Be a rainmaker, not a renovation company. You are the owner and your goal is to earn revenues or make a solid profit.

    Your estimates looked pretty solid, give or take cost differences geographically. While tracking the project budget, you could always contribute your own labor to bring pricing back in check if it started turning upside-down. Lot's you can to to build-in profit and expand margins along the way.

    Also, bear in mind that most sellers don't have the knowledge you possess. To them, your $25K rehab may appear to be a $60K nightmare (exaggerated a bit to make my point). Leverage this when negotiating - you always have your precision-crafted MAO to fall back on if the seller doesn't bite.

    Have fun with it. Stay on top of the numbers. Don't try to hard to make things shine - your recipients likely won't care as much as you do.

    Best!

    Vince

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  • Ben Reiss
    OP
    Wholesaler · Newark, DE · Member since 2011 · 50 posts · 4 votes
    14y

    Vince,
    You have some good points, I think I may have been over thinking the rehab. I might have been doing too much, actually I know I was making this place into something I would live in as apposed to what the market would take/want.
    I will look more at making the place "nice" instead of NICE!!! I forget that a 100K house doesn't need to be amazing. having new everything and a dishwasher and all tile will make the place enticing.
    Thanks for the ideas. I could prob cut down my rehab by a decent chunk thinking that way. drop the fence and just do landscaping and a few other things would put me closer to 18-20K instead of 25-30K I will have to get a solid idea on whats needed first though.
    I am going to walk a few comps after I take another look at this place. get an idea of the standard of build out in them.
    Thanks for the insight and keep any ideas or issues coming. I am still working on figuring out the market build.

    Thanks,
    Ben

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