Real Estate Agent · Slidell, LA · Member since 2017 · 208 posts · 267 votes
My team acquired a five unit in Suffolk, VA this past year and we are thinking of options of funding the rehab.
The windows and roof were finished in 2018. The house is over 100 years old. We watched the guy pull out 7 dumpsters full of debris and old building materials. When I walked through, the house no longer has any of the plumbing (galvanized steel) and none of the old wiring knob and tube, and actually is a blank canvas inside still would need to be built back from the studs to a five unit.
What am I missing?
1. Insulation
2. Plumbing (was plumbed for a three unit will expand to a five unit)
3. Electrical (was a three unit will need three breaker boxes installed and the pecker head moved)
4. Drywall, paint, etc.
5. Floor finishings
6. Water heaters
7. Ovens
8. Refrigerators
9. Structural and mechanical permits
10. A/Cs
My cash is locked up in other deals. I am estimating about 100k to fully finish this, with an ARV of 300k or higher, that I could refinance.
What are some creative ways to fund this, I have been doing buy and holds, and now looks like I got my first BRRR. Thanks in advance!
A couple of other items missing is kitchen and bathroom. Cabinets, countertops, shower, toilets, etc.. Are you going to have each unit separately metered for water? $100k seems low for the rehab to me depending on the size of the property.
If you own the property free and clear I would look at Iron Bridge. Have had several clients use them and seem to be happy with them.
@Kevin Paulk framing for all the doors and exterior is fine. Might need some paint by the time we are done. It has the old tiling from 50's that last forever as long as you keep them painted.
A couple of other items missing is kitchen and bathroom. Cabinets, countertops, shower, toilets, etc.. Are you going to have each unit separately metered for water? $100k seems low for the rehab to me depending on the size of the property.
If you own the property free and clear I would look at Iron Bridge. Have had several clients use them and seem to be happy with them.
Clayton Morris is a big advocate for this company and they have much more affordable rates than hard money. It sounds like you have a concrete idea of your plan and this may be a decent option.
@Ryan Poske this is in an economic opportunity area of Virginia, we do not put a high end or even middle of the road stuff in these units. Definitely accounted for thank you for the heads up. Five unit property, 4 - 1bed/1bath, one 2/1. Yes, each one will be separately metered for water and electricity.
@Ryan Cleary is it even safe to say his name ... Haha.
@Johnny Quilenderino, you pose two questions in your post: what am I missing: all the mill work, interior doors, closet systems or hanging rods at minimum, furnaces, water heaters, and many other things. I am echoing Ryan that your $100k is not going to cover it, but you sound like you have it mapped out. Just for reference, I am doing a 3,300 sq ft single family to studs: drywall labor is $30/board finished and the house is 250 boards. Our plumbing 3.5 baths and one kitchen is over $10k, and we had bids over $20k.
Second part is the lender front: not creative, but a local lender is probably your best and cheapest bet. I would get them in before you start any work, even if you had the cash, because they don't like stepping into the possibility of mechanics liens taking priority over theirs. Beyond that, I would google search for "fix and flip lender" or "rehab lender" and your area, and you will probably find a dozen.
Clayton Morris is a big advocate for this company and they have much more affordable rates than hard money. It sounds like you have a concrete idea of your plan and this may be a decent option.
I'm not sure I'd be taking my recommendations from Clayton Morris:
Kyle, that’s funny you say that, I disagree with most of the things he says on his podcast. I feel like a lot of times he is speaking out of his rear end, like I said I have not looked into this company yes but have heard of the strategy before.
@Evan Polaski my cost per board will be a little cheaper. I will be at the mercy of the trades, I will not use a GC, but I will get three bids on each piece of the project (Electrical install, plumbing install, finish work). These will be one bed, one bath, with a small closet, and upstairs is a two and one. Window units for A/C and baseboard heaters. No furnaces for units the economics of the area just does not support it and will not support it in five years.
I got quotes to get electrical, plumbing, Dominion power pecker head and meter installs to a total of combined number of 40k (material and labor). Then I have 35k in finished work materials it looks like and about 10k in permitting.
I guess the real question is now, how much does finish work cost. I know there was a formula of (2.5 x material cost) + 10 percent of fluff to get rough estimate of a final buildout is that about the same or with the fires and lumber cost skyrocketing etc. it is a little more expensive. Most of the house is framed internally, just missing things like the closets.
It really depends. If you have a chuck and truck handyman to do trim work, and you use the cheapest Home Depot 4" base and casements, it likely won't be too bad.
My contractor for my house is charging $11,000 for finish carpentry, including materials. In this house that is basically baseboard and door trim, plus stair handrails. He is not the cheapest but we are moving into this house, and he does top quality work.
Seems like you have the basic systems but seems like you are still using some rules of thumb at a point you need real numbers. Especially since it is yours get all the quotes now there isn't a reason not to and that will help with whomever you go with for financing. I have used ABNB on a commercial property in Norfolk, they were conservative but easy to work with. Dan Grubb is the guy I used.
Clayton Morris is a big advocate for this company and they have much more affordable rates than hard money. It sounds like you have a concrete idea of your plan and this may be a decent option.
I'm not sure I'd be taking my recommendations from Clayton Morris:
When I read Ryan's post i thought to myself: "He's gotta be kidding." Anything that Morris clown peddles needs to be vetted and re-vetted. I've seen threads on here about Fund and Grow as well. Buyer beware.
P.S. that reno budget sounds insufficient. I'd get a line-item scope bid out to have a proper idea of what the all-in is.
@Ryan Poske has lots of experience. As do I. It’s just going to be super hard to gut a 5 unit building for 100k. 20k/unit for all new electric, plumbing, HVAC and then close and finish is extremely cheap. The only way this would work if you and your team doing lots and lots of the work your self. Or using all unlicensed drug addicts.
Before you get super into be good to really firm numbers.
The house is already gutted and framed. The former owner got to the point of having the insulation inspection. The units are small. Trades need to get in for plumbing and electrical.
This is all section 8 housing or affordable housing area or an economic opportunity zone.
@Patti Robertson sorry for the heading! I wrote that under a sinus headache ... I am just coming out of the daze and realized I wrote "fell" instead of "feel." I always find out my mistakes after I post them .... sheeesh you would not think I had a MS ... or finished college right now :P