How I went over budget by 70k on a rehab.
Okay here it is 7 months in the making thanks to @K. Marie Poe @Bill G @Chris Clothier
So this post took me a grand total of 7 months to write.
Purchase price $174, 000
Hard Money loan $200,000
Original Rehab budget $40k.
Actual Rehab cost $110,000
Hard Money payments $20,000 – Hard money charged me a flat 10% payment of the total 200k
Closing cost to sell- $14792.50 +5000 seller help to buyer
Closing cost to buy- $8349.76
Utilizes- $1300.00
Total $333,442.26
Resale $370,000
Total Profit $36,557.74
Total money to the table at the beginning of the rehab $24,912.70. Total money I was out of pocket from the day I bought to the day I sold- Actually exactly 6 months later $134,912.70- $40k rehab given by lender=$94,912.70
I’m not gonna lie to you- Usually I keep a spreadsheet so I can tell you how much my rehab costs to the penny but there were days when I didn’t wanna do my spreadsheet because the numbers seem to not want to stop and after a while I just rounded up the number. It just keep going up and adding up and after a while I was like Oh my god what the hell- Where is a camera when you need one.
The tv shows look so easy- Go over budget just add an extra xxx to the price and house sold. It’s not true! Now I got lucky in this case I bought better than I thought I had- If not for that saving grace this post would read something totally different.
Now let me be totally honest for any newbie reading this post- Typically if you go over budget from what you originally told or worked out with your hard money lender then that money comes out of YOUR pocket until the house sells- As was the case with this house. Occasionally I think you can talk to the lender about helping you out but I’ve never taken that road.I’m not saying that it cannot be taken but I’ve never taken it.
How did I go over budget? I took on a very old house that I wasn’t familiar with- I got a GC estimate that was way too low and I believed that I could have made it work. Now because the scope of work changed after I bought the house- my hard money lender refused to give me draws till I passed all my inspections even though I was only getting back 40k of my 110k. So I went thru 100% of the rehab having received only 20k from my lender. I got the final 20k when the house was on the market. So yeah big sigh of relief for me- Look I got 20k back in my pocket but I’m out 70k till it sells.
The reality sets in- Okay the reality of the situation set in when I realized I had to go do new plumbing, electrical- entire house of duct work because originally had radiator heat coupled with the fact that I changed GC half way thru the process, prior GC got a deposit and I let him walk because of issues with another rehab project so I had to add that loss into my budget. This was the last house I used a GC on by the way. I’ve been my own GC ever since and it has worked out better than ever. Then I also had to get architectural drawings as well- decided that since I was spending so much money we should move the laundry room upstairs and move the bathroom to a new location.
I don’t know if any other post has ever stressed the BUY RIGHT but if there hasn’t been one let this be the first- Typically someone who goes over budget by so much is usually left broke and crushed under the weight of it all- Luckily I had enough cash and the ability to complete the rehab and get from under it and not let it stop me from doing other projects.
Will post before and after pics shortly.