MLS BRRR, Mold, Flooding and Lessons Learned

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Back at the end of April my partner found a property on the MLS they thought would be a good rehab. Of course I was skeptical because the MLS tends to be pretty picked over but we checked it out because she is smart and I'd be dumb to dismiss her opinion. It was listed for $198,000 in an area where the comps were selling for between $250,000 and $280,000. I was comfortable with an ARV of $265,000. After checking out the property I called the listing agent and there were already two offers. The numbers would be tight but we submitted an offer with an escalation clause knowing that once we were under contract we would have a better shot at negotiating after our inspections. During our inspections we discovered mold in the kitchen, guest bedroom, and guest bathroom. Luckily I knew as an agent to always make sure the company testing the mold was different than the company doing the remediation. The conflict of interest can make some sellers skeptical of the need for remediation. Also some remediation companies have told buyers, with me in the room, that they absolutely need mold remediation without even testing what was found. Long story short we were able to negotiate for the seller to cover the remediation. That covered removing the mold and the majority of the renovations of the affected rooms. Super awesome!

We decided to just have the remediation company remove the mold and do the majority of the rehab work. That will matter more later. Anyway, the day after we closed the remediation company came and started the process of removing the mold. While that was going on we wanted to get a head start on some of the smaller items on our checklist. One of the items was the termite treatment. My partner set up the treatment with a company I've used for a few years now as an agent. The day of the treatment my partner was at the property meeting with a handyman about knocking out a few of the other smaller checklist items. After showing the termite guy the house an getting him access to the areas he needed access too she went to the back yard with the handyman. All of a sudden they heard a weird noise in the house so they went inside to check on it. Apparently the termite guy had turned on the main water line to the house without saying anything to anyone. The kitchen and bathroom had exposed pipes from the demolition work done during the mold remediation process. In the 5 minutes it took to get the water back off the entire house was flooded with an inch or two of water. The termite company immediately blamed us. They tried to make out like it was commonplace for the person doing the treatment to get water from the house. Not only is that not in their service agreement but I have been to about 75 termite treatments and the only time the service-person gets water at the house is if they've run out of it in the large tank they carry on their truck. They called my partner stupid over the phone and were absolutely disrespectful in handling the situation. Luckily we kept solid records of everything and instead of taking it to court we were able to get their insurance company to settle.

Now, almost three months after closing we are just a couple weeks away from being done. My only regret is using the mold remediation company to do the rehab. You'd think that a one-stop-shop would make life easier, but we found out the hard way that the remediation company's systems are not set up well for renovations. They subcontract all of their work to another contractor. The subcontractor has an obvious issue with sexism and his company has overextend itself to the point we've been delayed on everything that has involved them. Now we're deciding if we want to sell the property or refinance it and hold onto it as a rental.

Purchase Price: $206,680

Rehab cost: $5000 (not including remediation money from the seller)

ARV: $265,000

If you are interested in the names of the termite company or remediation company DM me. I'm not going to publicly bash anyone.

We are on the lookout for our next project so if you are a wholesaler in the Tucson area shoot me a message. I'd love to see what you have available.



Thanks Tylor for sharing!  Folks are down in Tucson, AZ and love it there.  It's great to see these numbers to get an idea of some general prices in the AZ market.  Appears way more affordable than my previous local market in Southern California.  Think there is a ton of potential!  Best of luck.