My First Rehab: A Duplex - Fixed, Refi'd and Rented !!
A few months ago I was pretty confused on whether to pick up a Duplex that'd been on the market for almost 6 months without any takers http://www.biggerpockets.com/forums/88/topics/1630...
The inside of the house was not in the best of shape and there was no way we could pick up this place conventionally. Due diligence revealed that the place needed a serious rehab (roof, toilets, electrical, flooring etc.). So here's what we ended up doing- The before and after pics will help paint a better picture of the transformation:
- Property: 155k and 1600 sqft. in Washington County, Oregon
- Financing: Hard Money (estd. interest only monthly payments of 1.6k)
- Fix-up Budget Estimate 23k (before purchase - our plan was to do a lot of the rehab ourselves and save money): Roof-16k, Painting (Interior+Exterior)-1k, Electrical-1.5k, Flooring (Carpeting+Refinish Hardwood Flooring)-1k, Bathroom-0.5k, Misc. Labor-2k, Landscaping-1k, Misc Materials-2k
- Actual Fix-up Expenses 39k: Roof-13k, Painting (Interior+Exterior)-0.5k, Electrical-3k, Flooring (Carpeting+Vinyl Flooring)-1.8k, Bathroom-0.5k, Misc. Labor-10k, Landscaping-2.5k, Misc Materials-8k
As you can see the difference between the estimated and actual budget was filled with lots and lots of learning :) which I'll try to summarize here:
- It's always good to get multiple bids for roofing or any contracting work in general. Our bids varied from 8k to 18k. The more contractors I spoke with the more I learnt what questions to ask
- Unforeseen expenses did crop up as they always do. Like its been said in many posts, a contingency fund is always a must
- Our plan was to get the place fixed and rented in 10 weeks. It ended up taking us 5 weeks longer
- We learnt how to fix walls, toilets, install flooring, painting etc. All this gave us an idea of time and effort required and helps us judge fix up budgets and repair quotes better. Remember that before this the only thing that I could successfully fix in the house was a light bulb !!
- More than luck, money or real estate, this game is about people. We were very lucky to meet good people that helped us through each step of this process. We've made good friends and understood the value that we are adding to the community (previously this home was the blight of the neighborhood with a very shady tenant history).
In the end, we fixed up the place to one of the much better homes in the neighborhood. Got the place refinanced to a conventional mortgage and now have renters in the place. Our monthly mortgage payments are now 1k and the monthly rents are 2k. We still have some bills to pay on our credit cards and home depot loans (probably get done with those in the next couple months). This property however has given us a excellent insight on something we had never done before (hard money, rehab, contractors, handymen etc.) giving us an excellent insight on how we can move forward from here and things we can do better !!