Heyburn, ID · Member since 2017 · 15 posts · 5 votes
Hello, Fellow Biggers!
I am new, there is no getting around that. Where I live there is a house for sale. From the pictures and description, the house is basically gutted. They are asking 80k for the house. For me, it makes more sense around 70k. ( I Think) I was figuring the rehab would be around 40k. That estimate is figuring that house is basically structurally sound. Most of the work done by a contractor and me doing what I can around the property to get it ready. ARV I pin it at $160,000. I would like to use Hard Money on the project and focus on getting it done ASAP and on market. The property is out-of-town a little and the little community there is nice. Should not have a problem selling it. Would like to keep profit after $20k-$30k.
Questions I am after:
1. Inside need serious work. Am I low balling too much even guess?
My most ideal situation is to find a partner that is a contractor. So I have access to someone that can bring a crew and have the same goals in the project. Any suggestions on how to make that a possibility?
Big project...wouldn't jump into this one without a good contractor who has also seen the place and gives me a detailed cost estimate and is gung ho for this project. I wouldn't not do it, just realize that time is money on a flip and you want a good GC with a good crew that is going to show up and get the job done. Don't overlook the details, they can add up...
I always try to overestimate repair cost and underestimate ARV just for my own piece of mind.
Big project...wouldn't jump into this one without a good contractor who has also seen the place and gives me a detailed cost estimate and is gung ho for this project. I wouldn't not do it, just realize that time is money on a flip and you want a good GC with a good crew that is going to show up and get the job done. Don't overlook the details, they can add up...
I always try to overestimate repair cost and underestimate ARV just for my own piece of mind.
I have to agree with this response^^^
You could spend half your budget on kitchen and bath alone? This house needs EVERYTHING. Including inspections likely so that could slow down your process adding to your carrying costs. How long will this take to rehab and then sell? If it's a 3 month project you are looking at putting it on market to sell in December. How fast/slow is your market at that time of year? I know in the northeast market times can easily double in winter months, especially in holiday months.
Based on the photos and your arv estimate, you need to buy for under 50 to break even. The exterior photo showed how deferred the maintenance is there so you have to plan to replace almost everything or atleast have a budget line item towards repairing/cleaning it up. I would easily spend 100k for rehab. You would possibly be into a higher arv range though too.
@J Scott is right in the fact that this scope of work is a bit intensive for a first timer. You also have to consider the distance from your house. not fun when they are far away
If this is your first one just pass it on, there is a whole that can happen through gut rehab. You might probably loss money looking at the work needed and time frame.
Why not post up your budget numbers? $40K seems light by at least double in my mind. What are you carrying for simple things that are required, like insulation, sheetrock, tape and compound? These costs alone could easily be $8000-10000. Have you assumed a brand new HVAC system, new wiring all done by licensed (if needed in your area) people? How about that driveway, that would be $5000+ in my area, and more if it was a 2-3 car width the whole way up. Just in HVAC, sheetrock/insulation and driveway my budget would already be approaching $25-30,000.
$40,000 is a cosmetic rehab in my mind, not a full gut and redo, unless labor costs in your area are substantially cheaper. I would spend some time really breaking down your rehab numbers. Partnering with a contractor is NOT going to save you money because he wants the same thing as you... it is only going to take more money out of your pocket, as he will need to be paid for his subs and laborers no matter how much you buy the house for.
The number one risk here is what you already know: that you don't know.
Address the knowledge risk and it will all become clear.
To answer your questions:
1) yes you are lowballing your estimates by a lot.
By the size of it looks like 1600-1800 sqft plus another 300-500 sqft in the garage. If a gut rehab is say $50-$100/sqft in your neighborhood and for inexperienced folks that's often 30-100% more on top of that, how far off is your estimate? You'll spend 40K before you even start...
2) everything, really, foundation, size, permits, zoning, condition of sewer lines or septic, etc etc etc.
Do yourself a favor and learn to crawl before starting a marathon, which is what a gut rehab is. Your future self will thank you for it. There are a bunch of good books to help you get you on that path, not the least of which are by @J Scott who has already chimed in above.
Electrical and plumbing first, get quotes. Then have your contractor follow. To echo everyone else's sentiment first time rehab,
You are looking at 80-100k depending on finishes.
Just try putting together an estimate of the materials, tile, flooring, sinks, appliances, plumbing, drywall,tape mud etc. paint, driveway, electrical fixtures, locks, trim, faucets, cabinets, vanity, toilet,shower head, light bulbs,doors ,
Knobs, countertops, landscaping...I suspect just in materials you will be close to 40k...do you need to replace windows? Ac? Hot water heater?
I am sure I am missing a bunch of items, then add labor, carrying costs, insurance, permits,
Closing costs etc, property taxes
We did our first one last year, it took us twice as long and cost about twice what we anticipated, well not quite but close. It was a great experience, we learned a lot.
Also plan on losing 10-20k, and having the cash reserves to finish the project. And what is your exit strategy if it doesn't sell?
Lastly, why are you able to get it gutted? Someone started this project before you. The advantage is you can see everything, but why did they quit? What did they come across that forced them to stop?
Did they find something that was a deal breaker? Septic? Foundation? Roof? Permitting?