Flip report - Sinkhole (56k go home)

Flip report - Sinkhole (56k go home)

Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes

Well, some of you may recall that some months ago I posted a flip blog for the Heart Attack house. We bought two houses, side by side, on a street in a developing area. The Heart Attack house was a gut-out renovation.

The other house was a complete tear-down. I've been meaning to post the pictures and story on that one for awhile, but things have kept me busy... so here it is, belatedly.

This house was listed on the market for a couple of weeks before we took interest in it. Usually, houses don't last long... the fact that this one had been up for so long meant that there had to be something really, really wrong with it.

We weren't disappointed! The house was actually occupied by a very sad-looking addict who had made a habit of leaving blood-soaked cotton balls and bandages throughout the house. The center of the house had fallen in on itself and virtually everything was oozing and decaying front wood rot, termite damage, water damage, copper theft, and virtually every other form of abuse a house can possibly be subjected to.

We picked the house up for what was virtually a song - under $25k. We knew from the first time we stuck our heads inside that the house used to be beautiful, but needed to be completely torn down.

Closing was... interesting, to say the least. The owner was a very nice but very old lady who came dressed as though she was going to church, resplendent in a large hat with a lot of decoration. She complained the entire way through closing that we were "stealing the house from her" (as she signed document after document) and that she should be getting the full purchase price (Even though there was more than $12k in unpaid taxes and utility bills), and that the house was "beautiful" and that we could "just move in"

All in all, pretty funny in retrospect.

Anyway, here are some of the "before" pictures...

Front yard -

Back bedroom -

Weird back room that someone DIY-added somewhere in the distant past -

Another of that same room -

Kitchen -

Bathroom -

Hallway -

Front bedroom -

Dining room -

Front porch -

Living room -

Front of house -

Back of house -

Back yard -

Side of house -

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House Flipper · East Stroudsburg, PA · Member since 2013 · 1k+ posts · 205 votes
13y

Are you tearing the house down and building a "new house"?
Or are you going to do a remodel? What do you think your improvement costs to be for the area you're in.

See this reply in the discussion

43 Replies

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  • Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    13y
    Originally posted by Ann Bellamy:
    I think it's sad that the seller thought the house was move in ready.

    She probably was remembering what it once was. I've run into several sellers like this. Remembering how much they paid and put into it over the years.

  • Real Estate Investor · Hampton, VA · Member since 2012 · 562 posts · 109 votes
    13y

    Aaron McGinnis Great job, love the pictures, curious to know how long the project would of taken if you hadn't started and stopped. How was your experience in working with the City of Atlanta?
    What are the final specs of the house (#of bedrooms and baths)

  • Deborah BurianPro Member
    Rental Property Investor · Oklahoma City, OK · Member since 2013 · 1k+ posts · 412 votes
    13y

    Aaron - really beautiful, thanks for sharing.

  • Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes
    13y
    Originally posted by Jon Klaus:
    I may have missed it, where does the (56k go home) in the title come from?

    It's the old school way of warning people on 56k dialup that there are a lot of pictures in a post. Do people even use dialup anymore?

    House looks great. I like how you guys used granite in the shower. I may use that idea in a spec i'm putting up this summer.

  • Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes
    13y
    Originally posted by Steve K:
    Originally posted by Jon Klaus:
    I may have missed it, where does the (56k go home) in the title come from?

    It's the old school way of warning people on 56k dialup that there are a lot of pictures in a post. Do people even use dialup anymore?

    Ah, should have know but must have blocked that bad (slooow) memory.

  • Suwanne, GA · Member since 2013 · 4 posts · 0 votes
    13y

    Great work bro Aaron McGinnis and great post

  • Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
    13y
    Originally posted by Andrea M.:
    Aaron McGinnis Great job, love the pictures, curious to know how long the project would of taken if you hadn't started and stopped. How was your experience in working with the City of Atlanta?
    What are the final specs of the house (#of bedrooms and baths)

    Total boots-on-ground build time was about 7 weeks. 3/2, 1550sqft.

    City of Atlanta is very, very slow to issue permits. The permit for this job took just about 45 days to issue, and the department has slowed down considerably since then. They also aren't very helpful in telling you what the plan requirements are until they reject your plans for whatever reason... so in other words, it behooves the thoughtful investor to use an architect who has a long (and current) track record of getting plans pushed through the permit department. The architect we used here also acts as a permit expeditor, which is to say... he will walk the plans through, has relationships in the department, and knows exactly how much info to give to get the desired permit. This is HUGE.

    After permitting, the inspectors are an interesting bunch, each with their own idiosyncrasies. The biggest problem becomes time... once you call an inspection, you get about a 3 day window when the inspector may or may not show up. This makes perfect scheduling very hard to do.

  • Multi-family Investor · Warsaw, IN · Member since 2012 · 7 posts · 1 vote
    13y

    That's a nice house. Why did you tear it down and rebuild though? If you were going to build a brand new house, why not get an empty lot instead of paying $25,000 purchase + $12,000 teardown just to have a blank slate?

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by Brad E:
    That's a nice house. Why did you tear it down and rebuild though? If you were going to build a brand new house, why not get an empty lot instead of paying $25,000 purchase + $12,000 teardown just to have a blank slate?

    I think I can answer this one for Aaron...

    It's very tough to find buildable lots for sale at that price in this area.

    You pretty much have to buy houses from motivated sellers for less than the land value itself to do this...

  • Wholesaler · Fort Worth, TX · Member since 2011 · 163 posts · 45 votes
    13y

    Looks great Aaron McGinnis. Congrats on this one.

  • Renter · Las Vegas, NV · Member since 2013 · 19 posts · 1 vote
    13y

    Really nice work Aaron McGinnis. Thank you for sharing your project.
    To understand the numbers, $24K to purchase, $12K to tear down/remove, $170,500 to rebuild for $206.5K in costs, sold at $240K for a profit of $33.5K. Were there any additional or unexpected costs?

  • Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
    13y

    Brad E - J is exactly correct. The neighborhoods in which I operate don't exactly have an ample availability of vacant lots. (The neighborhood this house was in, for example, has been in development/use since the late 1870's... vacant lots mean that someone tore down a house and never built a new one, and they just aren't common)

    So as a result, new construction really only happens when you get a house that's so far gone that there's nothing worth keeping... or you can get it so cheap that it makes sense to tear it down.

    Robert Wright - Close. The tear down was part of my total number... so more like 24k to buy, ~170k to develop, and a sale of 240k.

    Can't say that we really had anything too unexpected happen. We knew from the get-go that we had to tear the house down, and it certainly wasn't our first rodeo in projects of this size, in that City.

    I'd say if anything crept up on me it was an absolute avalanche of work that came up during the build. Trying to keep customers happy meant that the project took like... 6 months to actually finish up.

    The biggest reason was that our command staff would get distracted and do something really bone-headed like "Hey, you ordered windows 3 weeks ago... right?" ... and that would trigger a 3 week wait for windows, during which time we were at a dead-stop with the project.

    So yeah, that sucked. It also prompted us to change some of the processes we use to make sure that materials get ordered on time.

    Remember kiddos: Every failure is a teachable moment and a good opportunity to take a hard look at why it didn't work and what you need to do differently.

  • Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
    13y

    Aaron McGinnis

    Originally posted by J Scott:
    Originally posted by Brad E:
    That's a nice house. Why did you tear it down and rebuild though? If you were going to build a brand new house, why not get an empty lot instead of paying $25,000 purchase + $12,000 teardown just to have a blank slate?

    I think I can answer this one for Aaron...

    It's very tough to find buildable lots for sale at that price in this area.

    You pretty much have to buy houses from motivated sellers for less than the land value itself to do this...

    All-in for $40K for a $250K exit on a rebuild sounds good to me. In some areas you have to create the lot with the right buy price plus demo because otherwise it just doesn't exist.

    Aaron: would you do a similar build on prop/lot you could get in that area at today's value? You mentioned 80K? Would there be enough margin (and enough ongoing appreciation) to make you do it again if you could get in at $80K

    J Scott If I'm remembering correctly, you'll be in all-in at a comparable price as Aaron for your ATL downtown lot. Will your re-sale be higher than $250K?

  • Flipper · Irvine, CA · Member since 2013 · 349 posts · 45 votes
    13y

    Thanks Aaron McGinnis for sharing and providing details. You have motivated me to post my first rehab experience in Orange County. The after pics look great! I'm assuming the furniture is staged. If so, do you recommend staging? Do you stage all your properties?

    Thanks again.

  • J ScottPro Member
    Moderator
    Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
    13y
    Originally posted by K. Marie Poe:

    J Scott If I'm remembering correctly, you'll be in all-in at a comparable price as Aaron for your ATL downtown lot. Will your re-sale be higher than $250K?

    We are estimating $30K purchase, $165K rehab and $260-270K resale. The big differences are that Aaron built on a slightly nicer street (in my opinion) and our house will be a good bit bigger (2600 sf). So, I'm expecting/hoping that the little bit less nice street is accommodated for by the larger footprint and that our exit is around the same price or maybe a bit higher if we can get it finished during selling season.

  • Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes
    13y

    K. Marie Poe - Ask me how come I haven't bought a house in Reynoldstown lately! I would not do it again for current market prices in that neighborhood.... the buy side is too expensive and the retail prices haven't really caught up yet.

    Jimmy Hong - That's actually staging equipment we own... it gets stored in our warehouse between use.
    I believe that staging makes an enormous difference in saleability. People tend to buy what they see, and putting in staging lets them envision themselves in a space easier. At least, that's my story and I'm sticking to it...

  • Real Estate Investor · GA · Member since 2013 · 34 posts · 3 votes
    13y

    Very nice work Aaron. It looks great

  • Sand Springs , OK · Member since 2013 · 5 posts · 1 vote
    13y

    "Remember kiddos: Every failure is a teachable moment and a good opportunity to take a hard look at why it didn't work and what you need to do differently"

    Great quote! Great project! Thanks for sharing!

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