Project #3: Single-Family Home in Havre de Grace, MD

19 Replies

So, we are closing today on our third LLC project. Previously, we closed on a single-family home, which we renovated and rented. We have also purchased a three-unit multifamily that has all three units rented, but hasn't turned out quite as well as we've hoped.

Our third project is another single-family home in Havre de Grace, MD.  This one involves a bit of risk, in that the house is not entirely on the lot.  The front of the house is built on property owned by the City, but that is grandfathered in.  The very back of the deck extends ever so slightly over the property line of the rear lot.  We're considering making an offer to buy 15-25' of the lot behind so that we can create a decent fenced-in yard to make the property more attractive.  I discovered the issue with the location of the house, and as a result was able to bargain the purchase price down another $10,000 from the initially agreed price, which was already about $10,000 below the original asking price.  In the end, we're purchasing the house for $81,900 (about $88,000 after taxes, fees, and realtor costs). The house is a 3/2 with about 1700 square feet of living space.

Our rehab budget is about $50,000, including $12,000 for two bathroom remodels, $5,000 for a kitchen remodel, $9,000 for a new roof, $10,000 for HVAC and plumbing, with the remainder for carpeting, flooring, painting, and appliances.  Although the floor plan would be best if we removed some walls from the kitchen and opened the space up, the extra cost to do so (given that HVAC ducting and electrical run through the wall to the second floor) is more than we can justify for a rental.  Instead, we're going to open up the kitchen somewhat from the front door, so that you can see all the way through the dining room to the back deck.

So, all told, we expect to be in for about $138k. The ARV should be $185-200k. Monthly rent of $1400-1600.

Awesome...keep us updated. A couple quick thoughts.

I think the roof estimate seems high.  If we could see a picture of the outside, may be able to confirm this or understand the high quotes.

Not sure what part of the plumbing is adding into the HVAC estimate, and what is involved with the HVAC (New Duct Work) but this quote could be high or low depending on whats involved.

The kitchen estimate seems really low to me. Id like to know the plan in there. I can see it needs backsplash, and counters...Im assuming you are going to replace those cabinets. If it needs new appliances and flooring too, that budget isnt going to come close to cutting it on the kitchen.

But I think you have a high enough margin on this to overshoot your budget if your ARV is correct.

Originally posted by @Russell Brazil :

Awesome...keep us updated. A couple quick thoughts.

I think the roof estimate seems high.  If we could see a picture of the outside, may be able to confirm this or understand the high quotes.

Not sure what part of the plumbing is adding into the HVAC estimate, and what is involved with the HVAC (New Duct Work) but this quote could be high or low depending on whats involved.

The kitchen estimate seems really low to me. Id like to know the plan in there. I can see it needs backsplash, and counters...Im assuming you are going to replace those cabinets. If it needs new appliances and flooring too, that budget isnt going to come close to cutting it on the kitchen.

But I think you have a high enough margin on this to overshoot your budget if your ARV is correct.

 The roofing cost is to replace all of the shingles with 30-year architectural shingles.  It also includes some repairs to the subroof.  

HVAC includes new furnace, refurbished air handler, new water heater and expansion tank, sump pump, and some duct work.  Plumbing involves moving a sink and some other minor changes, new fixtures, etc.

The kitchen rehab cost does not include appliances, which are  budgeted separately.  We're not planning to replace the cabinets, as they are pretty common for rentals in the market.  We are however, going to remove the hanging cabinets between the dining room and the kitchen.  The kitchen estimate is largely (1) opening up a doorway, (2) moving a light switch, (3) countertops, and (4) backsplash.  We may upgrade to granite at the end (another $1500 or so), if we're doing okay on budget.  The flooring in the kitchen and most of the downstairs is actually recently replaced.  It's not great laminate, but it will do for a tenant or two.

HVAC/Plumbing costs seem right on then with the further explanation....as does the kitchen stuff now with the more details.

I think you should be able to get the roof done cheaper though. Within the last 18 months Ive had 2 roofs replaced...one in Rockville on a split level, and one in Silver Spring on an L shaped rambler.  Both architectural shingles, both requires some plywood replacement, and I think one cost me a little over $6k and one about $7k. Im guessing by the square footage of your house its similar in size...so I just might get another quote for the roof.

Whether you are keeping this as a rental, or flipping it...Id definitely go with granite.  Home Depot and Lowes each have 4 granites you can choose from that are about $30-$35 a square foot installed. (Same choices each time, price just varies with sales). I throw the same 2 from Home Depot into each of my rentals. The cost difference when you factor in the installation is negligible compared to laminate.

Originally posted by @Russell Brazil :

HVAC/Plumbing costs seem right on then with the further explanation....as does the kitchen stuff now with the more details.

I think you should be able to get the roof done cheaper though. Within the last 18 months Ive had 2 roofs replaced...one in Rockville on a split level, and one in Silver Spring on an L shaped rambler.  Both architectural shingles, both requires some plywood replacement, and I think one cost me a little over $6k and one about $7k. Im guessing by the square footage of your house its similar in size...so I just might get another quote for the roof.

Whether you are keeping this as a rental, or flipping it...Id definitely go with granite.  Home Depot and Lowes each have 4 granites you can choose from that are about $30-$35 a square foot installed. (Same choices each time, price just varies with sales). I throw the same 2 from Home Depot into each of my rentals. The cost difference when you factor in the installation is negligible compared to laminate.

 I would be surprised if we don't do granite.  We did on our last single-family.  On the multi-family, we went with laminate.  The units there were renting for sub-$900 and we couldn't justify the price.  We just usually wait until we're nearly done to make the call in case we've gone way over budget somewhere.  (Our first project we went over budget on the rehab by about 100%, and still went with granite.) 

The roof also includes GC overhead, because we don't supervise the project.  We're all in the DC area with full-time jobs other than real estate, so I think that's just the price we pay probably.  

Not much to report. Rehab is preceding on schedule. The HVAC work has been completed. We were able to repair the existing unit as planned, so we're still on budget. The new water heater is installed. It also came in on budget. The only big question remaining is the sub-roof. Our budget assumes that most of it is in good shape. The roofing contractor gets underway tomorrow. It should be complete in 3-4 days. If we can get trough that unscathed, we'll accelerate on the interior rehab and should finish up in the next 4-6 weeks. 

So, the roof has now been completed and the crew found no surprises.  The crew completed it yesterday and the rehab is proceeding full-steam ahead with the interior.  The interior is somewhat frustrating, because it presented a great opportunity to really open up the floor plan and make it something great, but the cost to do so could not be justified for a fix-and-hold.  So far, we're on budget and on-time, which is a significant improvement over the last major rehab we did.  That turned out pretty well in the end though, so hopefully this is a good omen for this one.  

Well, it turns out we won't be able to reuse the laminate flooring as we'd hoped.  So, the replacement is going to add a few thousand dollars to the budget.  To make up for this cost, we have chosen to sacrafice the jack-and-jill master bathroom.  Part of our bathroom rehab included cutting into the closet in a second bedroom, moving the sink and vanity, and installing a door between the biggest bedroom and the bathroom.  It is a shared bathroom with the other two bedrooms upstairs, so it wasn't a true master.  Ultimately, we didn't think the $1,800 was worth it given the additional cost of installing the laminate flooring downstairs.  

We've also decided to go with granite countertops and a mosaic tile backsplash in the kitchen.  That too has add a few thousand dollars to the budget.  

Our contingency fund was still pretty full though with only a sump pump failure (that caused no damage, just some pooling of water in an unfinished part of the basement) and gas leak due to a leaky valve having tapped the fund thus far.

We saved about $600 on our appliances by buying them on black Friday (online), so that helps cover the cost overruns as well.  All told, we're expecting to be in for about $52,000 on the rehab.  That will bring our total all-in cost to about $137,000 excluding loan costs on the back-end.  We now expect the property to appraise at the higher-end of the range based on a recent sale two blocks away with similar finishes and only 1.5 as opposed to 2 bathrooms.  Should still be a good deal for us.

So general question??  

How does this information not get picked up during a title search?

Originally posted by @Eric Schrader :

So general question??  

How does this information not get picked up during a title search?

 I assume you're talking about the position of the house on the lot? I determined there was a problem by looking at the legal description and comparing it to Google Maps. The title is clear, probably because no one has done a survey recently. 

I thought the handful of you who are paying attention to this project might appreciate some pictures.  

I'm being funny, but we did pass our pressure test and we got it approved by the City, so we can get the gas turned on and get the heat going.  Fortunately, it's been a little more moderate this week, so the crew has been able to do some work.

This was the living room kitchen before we opened it up.  We didn't open it up a lot, because (as you can see) the wall here has electrical and HVAC running through it.  That made it cost prohibitive to open up entirely. 

What we did do, I think helps a lot at a fairly minimal cost.  We expanded the opening into the kitchen leaving sufficient space for the fridge to stay in its current space (right on the other side of the wall) and having to move only a light switch.  You can see a post above the bar which is where overhead cabinets were hanging down about 10" from the ceiling over the bar.  We took those out.  The effect is to really allow a lot of natural light from the French doors in the dining room to flow through the house.  The kitchen is brighter, and this is the view from the front door all the way through to the back deck.  Would it have been better to completely reconfigure the kitchen, move the fridge hookup, and take out the wall?  Yes.  If we were looking to flip it, we may have done so.  For a rental though, we thought this was a cost-effective solution.

Here are the new granite countertops installed on the existing base cabinets.  Again, for a flip, we would have upgraded the cabinetry.  For our market though, these are acceptable in a rental at our price point.  Although it's hard to see, the countertops include both browns similar to the honey oak cabinets and the darker laminate flooring that we are installing.  (Keep in mind that our original plan was to repair the existing laminate, but ultimately decided it was beyond saving.)  Above the countertops, we will be installing a tile mosaic backsplash below the upper cabinets.

Still a fair amount of time to go.  The blizzard, cold, and gas line issues have delayed us, so we're now looking at early-to-mid March for completion.

Well, we got the water turned on this week, and it turns out that we had two cracked pipes in the laundry room and two broken valves.  The pressure coming into the house is higher than it should be, so we're going to get a pressure reducer installed and repair/replace the broken pipes.  Fortunately, the pipes were broken in the laundry room and did little damage as the space hadn't been renovated yet.  Breaking into the drywall to repair the leak exposed a small amount of surface mold that is apparently from a slow leak before we bought the property.  We're getting that cleaned up.  I don't have quotes yet on the repair costs, but they don't seem likely to be too much.

Well, two months behind schedule, but we are finally done.  Unfortunately, our team was hit with the flu which pushed us back about two weeks.  Everyone is mended now, and the house came out pretty well, I think.  After pictures are below.

Did this place sell or rent for what you anticipated? What are your thoughts on the market in Havre de Grace? New REI here from Harford County looking for my first deal and I'm considering the area. I'd love to hear how this turned out for you. House looks great!

Great looking rehab! It seems to be pretty low rent return compared to your total cost.   Hopefully you'll find someone in the $1600-1800 range, which is what I'd expect for this size house.  I have a few townhouses that get $1400 (your original rent estimate) in Harford County.

I've got three units in Harford Square and get $1370 (long term tenant), $1400, and $1400.  They are larger townhouses with finished basements, so that helps!

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