Made Only have 100k to rehab, most likely not enough

3 Replies

Hi BP. I find myself in a situation where I seem to have a deal in Los Angeles. To make a long story short, I've helped a few fix and flip guys for a while free and finally someone said they would wholesale one of their a deals to me.

At first glance it looks great. 250k purchase, ARV on something similar is around 550k. It's LA, has a view, I said yes.

After getting the go ahead from a hard money lender for purchase, they say they can offer 100k for rehab. My plan was to add about 500sqft. The more I look at it though, it seems like I'll have to do more than just gut it, but redo some foundation, reframe about half the existing building, new roof, rewire, plumbing, and new everything else. Basically all new.

Now I'm just stuck thinking I'm not going to be able stretch out 100k loan to get it done.

I'm an architect so I have some idea of what I'm doing. But the projects I work on are 500$+ /sqft. I see some flippers building for less than 100$ sqft and can't figure that part out.

I have tried to calculate materials and factor in labor but can't see how some people can build for 100$ sqft. Does anyone ever get estimates near this price?

At this point I'm thinking maybe just buy it, get the design permitted, and sell it as is.

Has anyone else run into similar situations?

@Henri Corbusier It's doable, especially for that kind, yes 100/sf is tough when everyone else is charging 150/sf for addition, doable, not impossible, but tough. it needs to be in-house, unlicensed contractors, owner builder, and cheapy materials (im talking about clearance or phased out), 99 cent flooring/tile, etc. Put your architectural hat out of the way and think like an investor. 300k spread is a lot, at closing on a 1 year hml, might be about 60-70k in misc exp, and the rest is hard const and profit, you're at 230k on both. You're on the right path. You're just over designing it, think box homes with gable roof. I wouldn't design and wholesale it, the new buyer might not like your design or it might be too expensive.

Just so you know. For every $100 we pay to our workers in gross wages, we pay around 10% in employer taxes (7.65 federal and 2 something state), then 6-33% (33% being carpentry, 70-100% roofer) in workers comp insurance, with carpentry we pay about 43% more than unlicensed. that's not including our profit, and when you compute for that 20% profit of $100 is $20, and $143 is $34.