Second story addition flips: Who's doing them in Socal?

Question

Hi all,

I'm beginning a direct mail campaign in a desirable neighborhood in OC. Entry on a fixer (original build dates are 1950-1970) is somewhere between $700-800k. Sale price after rehab - including 2nd story addition - is complete is from $1.1-1.4 million. Approximately 20-30% of this neighborhood has never been rehabbed.

If you're a buyer, how likely are you to look at a deal like this? Please comment below!

Kind regards,

Craig

Jay Hinrichs · Answer

@Craig Norris  yes,  but the gurus have instructed me to live the life I deserve

Eyan Lakhani · Answer

Hey @Craig Norris

Did you ever proceed with the strategy ? Would love to know more in terms of numbers.

ARV on single storey: $700k to 800k How many sq ft is it ?ARV on a 2 storey $1.1 to 1.4 (That's quite big range of 300k)How many sq ft will you be adding ? at what price ?

Project length and profit if you pursue as a single storey vs project length and profit as a 2 storey ?

Thanks

Craig Norris · Answer

@Jay Hinrichs 15% is doable. 20% means you got a good deal, but I thought I was supposed to put that money back into the business! ;)

Jay Hinrichs · Answer

@Eddie Prosser  boy I would love to get 20% after all costs... our market is so competitive that 10 to 15% is the norm these days.. 20% and you just bought first class tickets for a week on Maui

Craig Norris · Answer

Thanks, @Eddie Prosser! Great Advice. Where do you get the $250/ft figure?

Eddie Prosser · Answer

The key is finding the right General Contractor and Architect, who has executed this in the past.  For back of the napkin math, I would budget close to $250/SF and at then end of the day try to back into a number where you are making approximately 20% net margin after selling and financing costs.  From there you should be able to figure out what you can pay.

Craig Norris · Answer

Yes, 700-800k is full retail.

Not the highest priced house in the neighborhood, but close.

Rehab costs will vary, but I assume fully gutting will be necessary given the condition of some of these homes. Permitting shouldn't be a problem as there are a few homes having 2nd stories added now, and much more in the past. I'd say the neighborhood has 1/3 2-story homes. The rest are single story, some with more square footage than others, but from 1400-1800'. I'd love to talk with someone who has done these!

Tim FitzGerald · Answer

Craig,

Is the 700k-800k full retail price of the original sq ft ? And would the 1.1m-1.4m make it the highest priced house in the neighborhood  ? What are the costs for a 1st floor rehab and a 2nd floor add, knowing adding a 2nd floor will all need to be designed, permitted, and at least some structural work ?

Second story addition flips: Who's doing them in Socal?

Most Popular Reply