Warnings for 1st Time Complete Gut Renovation DC Row Home

[Frank A.]

Hey BP, 

My wife and I are getting relocated to DC this summer and the only way we can get everything we want in the city is by performing a "live and flip". We're going to buy a fixer with a 203K construction loan and will do a complete gut renovation. We are nervous about this because these homes are all early 1900s builds. We've never done something so old before hahaha. 

We plan to open up the main floor and add a half bath. The upstairs we'll create an in-suite bathroom for the master and add an additional bathroom (if there's space). The basement we plan to finish as a studio with full bath and kitchenette, "apartment"/Mother-in-law suite so that we can rent it out and house hack. 

For the experienced DC rehabbers, what kind of surprises in these renovations should we prepare for and how do we know if a contractor is prepared for them? Thanks in advance. 

[Russell Brazil]

Quote from @Frank A.:

Quote from @Russell Brazil:

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Quote from @Russell Brazil:

Quote from @Frank A.:

Hey BP, 

My wife and I are getting relocated to DC this summer and the only way we can get everything we want in the city is by performing a "live and flip". We're going to buy a fixer with a 203K construction loan and will do a complete gut renovation. We are nervous about this because these homes are all early 1900s builds. We've never done something so old before hahaha. 

We plan to open up the main floor and add a half bath. The upstairs we'll create an in-suite bathroom for the master and add an additional bathroom (if there's space). The basement we plan to finish as a studio with full bath and kitchenette, "apartment"/Mother-in-law suite so that we can rent it out and house hack. 

For the experienced DC rehabbers, what kind of surprises in these renovations should we prepare for and how do we know if a contractor is prepared for them? Thanks in advance. 

Post WW2 rowhouses found in say Brentwood or Riggs Park will offer an easier more straightforward rehab. Older ones in Shaw, Columbia Heights and Petworth can be more complicated.

I generally advise against doing a basement digout for beginners.

Also realistically if you're going to be planning on doing a 203k loan, youll need to target properties that are stagnant on market...which will generally mean willfully over paying. On a new to market property you have virtually no chance of getting an offer accepted with a 203k loan. Hatd enough with conventional financing competing against cash. Avout 1/4 of transactions in DC are all cash. 

 Hi Russel,

What's the problem with the 203k in DC (that's where it's from, you'd think they would make it work there)?

 Properties here typically get 5-20 offers. 25% of all sales are all cash. A 203k loan will take 60-90 days to close, so it simply is a loan product that can not be used in a market as competitive as our in most cases. 

I'm surprised to see a moderator with such a pesimistic attitude on a forum meant to inspire and motivate... On the positive side, that also means 75% of the homes sold are not cash. So far I've had two 203k offers accepted but we just couldn't agree on price. 

Closing times are going to be longer but my lender has schooled us on ways to accelerate it like buy having our HUD consultant and 3 contractors for bids picked out ahead of time. To include a default scope of work built that will just need tweaks from property to property. 

With these measures in place we think we'll be able to close in 45-60days vs the 60-90 average. 

As they say, a savvy investor will always find a way!

 So you think it would be better to lie about market conditions so as to be inspirational and motivating?

My job on these forums, is my same as being a broker, and Im one of the top 100 in DC/MD out of 60,000 agents....it is to convey the realities of the market.

You know how many 203k loans closed in DC in the last year? 13. I closed 2 of those. In the DC region outside the city....34 additional ones. Thats out of over 80,000 home sales.

I'll leave the job to be inspirational to others. I unabashedly have always offered the reality of real estate, whether it' whats people want to hear or not....and thats why me, my clients, my friends and followers are closing deals year after year getting rich using the methods our market offers us, instead of focusing on strategies that dont work in our market.