Diary of a POP TOP Second Story Addition Project

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

@Karen Margrave feel free to steal away! My hope with the Q&A Open Houses is to not only LEARN from some folks with experience on similar projects, but also to provide an opportunity to people who may be on the fence about rehabs or are looking to LEVEL UP from just cosmetic rehabs a chance to SEE and EXPERIENCE a working jobsite through various stages of completion, and ask questions about WHY we are doing the things we are doing.

Some people just need to read sites like BP or J's 123flip.com , "both of which gave me confidence and inspired me to do what I do now" to give them all the ammo they need to get out and make things happen. Others need to SMELL a port-o-john and SEE someone actually doing what they want to do to take the NEXT step!

3 Reply

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

@Rick Baggenstoss AWESOME! Hopefully you can chime in with some good perspective along the way!

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

Backstory of “THE Backyard”

Besides spending time with my kids and sipping fruity umbrella drinks in exotic locales, few things I enjoy more than getting a call from someone in our ever expanding network of Real Estate Agents and Wholesalers to DROP what I’m doing to go check out a killer deal!

We have been on a BIG acquisitions push lately and have also been working hard on expanding our investor network. This call could help with both.

I had been hearing stories about the Legendary International Real Estate Man of Mystery @Cal C. for years, this property was on his side of town and it was time to make the connection.

I gave Cal the address and we met the agent at the property. I wasn’t totally sold on the deal when I pulled up, although it was close to some other projects we are working on and in the same SUPER DESIRABLE High School district, it is in a slightly less desirable elementary school system, “but still a GREAT elementary school by Intown Atlanta standards” It didn’t really matter what the house was like since we originally planned on demoing it and building 100% new construction on the lot, so as I walked through the house I just kinda poked my head from room to room not really paying attention until….

SOLD!!!

WOW!! As soon as I saw the backyard I broke the #3 Rule of Real Estate and INSTANTLY became emotionally attached to the deal. I HAD to have it.

Time to make the Offer….

Cal C.

Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes

11y

As nice as this picture is it doesn't do justice to a beautiful backyard and a fantastic shade tree. I don't think any picture could adequately show how great this backyard is!

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

ADVANCED TECHNIQUE DUAL PHASE WHY\HOW NEGOTIATIONS

The deal looked like a SLAM DUNK. It had the location. It had the upside. It had the backyard. All I had to do was accept the sellers 230k “off market” price.

The only problem was, I knew the “WHY”. Sellers have a story. All you have to do is ask. Sometimes you have to ask multiple times in various ways. But if you can find out the answer to, “So WHY are you selling?”, your negotiating POWER increases SIGNIFICANTLY, because then you can ask yourself the most PROFITABLE question you can ever ask yourself, “HOW?”

At first it was ALL about price. 230k TAKE it or LEAVE it. Sure, we could have just played the numbers game and submitted a lower offer, justified it with the condition of their house and the fact that we are paying cash and could close FAST. But all of those things would have worked AGAINST us...

So when we asked WHY the sellers are selling, turns out the sellers absolutely LOVE this home and DON’T want to move! BUT..

Now comes the HOW part. HOW do we CONNECT with the seller? HOW do we HELP them achieve THEIR goals? If you can answer these questions on a consistent basis , you can make some money on a consistent basis.

Instead of pointing out all the little stuff “WRONG” with their home, we CAST A VISION for the great possibilities of what their home could become. Remember, sellers know more crappy stuff about their house than you do, and usually don’t want to be reminded of it. By "visioncasting" our ideas about the place, the sellers felt an emotional connection and excitement about selling their place to US.

Instead of pushing the fact that we could close FAST, we proposed either renting the house back to them for a period of time or setting up the closing date for 60-90 days in the future. Our flexibility was IDEAL for their situation AND it was ideal for ours. The extra time would allow them to conduct their house search without the FEAR of having to do it from a Motel 6, and it allowed us to get some of our planning and design work completed before the clock started ticking on the interest payments to our investors.

The ensuing negotiations split into two phases. The purchase price and terms took about a day to hammer out. We had a “deal” at 225k, 21 day due diligence, close in 30 days. The rent back portion of the negotiations took over TWO WEEKS! We went back and forth over rental amount, they were at 1k/month we were at 2. We wanted an escalating rent schedule to behoove them to move, they wanted consistency incase it took longer than expected to find their new place. We ended up at 2k per month with no escalation.

We did better than we initially thought on the acquisition AND the sellers ended up with a better situation than they initially thought they would have selling, all because we asked WHY? and HOW?.

Next up the “Over”Due Diligence...

6 Reply

James P.

New to Real Estate · NYC · Member since 2014 · 37 posts · 9 votes

11y

Thanks for the update Todd. I'm looking forward to checking out the progression of the property!

Donald Boone

Real Estate Investor · Capitol Heights, MD · Member since 2014 · 3 posts · 1 vote

11y

Awesome story and idea to chronicle your idea Todd. I'm hoping to one day do something similar in Houston and had questions about the costs associated with adding an additional level. I'll be watching closely. Keep the updates and pics coming! Appreciate your sharing...

Jon Klaus

Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes

11y

I'm following along with interest as I'm considering making a one story into a three story. Come on with some more details/specs!

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

TIME > MONEY THE DUE DILIGENCE GAMBLE

You can ALWAYS go out and CREATE more money. Not so easy to go out and create more TIME.

I approach due diligence MUCH differently now than when I first started investing.

Then, I had made no mistakes."At least not in Real Estate" Now, I have made LOTS of mistakes. LOTS of REALLY REALLY RIDICULOUSLY expensive mistakes.

Then, I made offers on LOTS of properties I really wasn’t sure if I was going to buy or not. Now, I ONLY make offers on properties that I REALLY REALLY want, and have done some preliminary recon on.

Then, I “trusted” real estate agents for comps and contractors for repair bids. Now, I still “trust” them, but I have enough experience and resources to call Bull %$^#*$ when needed.

Then, I would invest the LEAST amount possible to gather information and DEFINITELY wouldn’t spend a DIME on ANYTHING that I wouldn’t need unless I closed on the property. Now, I push FULL STEAM AHEAD as soon as I get a property under contract. Using the Due Diligence and any other time I can negotiate in before closing as “FREE RENT” to get as MUCH of my preliminary work done as possible so I can start the project ASAP after closing.

Part of my Full Steam Ahead approach is to have my architects come in right off the bat and do a preliminary AS-IS floor plan so we can get start the “Ideating” about designs and get more accurate bids and takeoffs from subcontractors. There are few things more frustrating AND EXPENSIVE than wanting to start a job, and having to wait MONTHS AFTER closing to get designs, engineering, and bids completed!

Bigger Version Here

I still use due diligence to gather my final GO / NO GO for launch information, because there are many things that without a proper survey and chat with the friendly folks at the county office I wouldn't otherwise know.

Next up, we’ll look at our Due Diligence checklist for the things we look for and VERIFY during DD for every property as well as our specific concerns with this one.

2 Reply

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

@Donald Boone We are spoiled in most parts of Metro-Atlanta with pretty good soil to build on. Go ahead and check with some soil engineers in Houston to see if there are any general concerns with the soils in the neighborhoods you are looking to invest in. This variable can make or break a 2nd Story addition or New Construction project / budget.

We have built some new construction in Alabama that required Post-Tensioned slabs, something we had never heard of before, and an added expense we had not initially budgeted for.

Podcast Guest on Show #29

Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

11y

You said the purchase was $225k and rehab will be $175k and ARV once you add on the second story will be $525k. What is ARV before adding on the second story?

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

@Jon Klaus I'm feeling behind the times now... I may just have to hit up @J Scott for some more cash and get a variance to turn this into a 4 story!

4 Reply

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

@Dawn Anastasi If we kept the house a 3/1, just cleaned it up and put it on the market today we would be somewhere north of the 250k range. If we added a bath and some additional footage off the back of the house we could get into the 300s.

Since we are going to a 4/3, doubling the square footage, and doing some other stuff "raising the first floor ceilings to 9', all new mechanicals, new open layout ect. It will allow us to compete with new construction comps in the area which are 500-700k.

We are actually building a new construction house just down the street from this project which will be listed in the 700s

Podcast Guest on Show #100

Karen MargraveBusiness Member

Moderator

Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes

11y

I'm trying to get @Joshua D. to do a special forum for the threads on New Builds and Remodeling Projects, that way it would be easy for everyone to follow all of these jobs. It's so hard to keep a tally of each one you want to follow, even with "monitoring".

I'll be watching this thread. Great that you worked "with" sellers, always smart move. Sometimes people like that are open to Joint Ventures too, where they have a lot of equity, would like to find a way to maximize profits on their property, but don't have technical skills.

3 Reply

Joshua D.Pro Member

BiggerPockets Founder · HI · Member since 2008 · 16k+ posts · 5k+ votes

11y

@Karen Margrave - Once we get more of these I'll be more than happy to create a new forum.... ping me and we can discuss. Thanks!

Colleen F.Pro Member

Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes

11y

A sort of build diaries forum. I like the idea, I think it takes dedication to the writing though and I admire those people who find the time to share the project while they are doing it. And also share when they make mis-judgements along the way.

If work takes me to Atlanta I would have to try to go see it too because this one sounds interesting. Had this been an idea you were thinking of and looking for the right house or did you just see the house and find it was suited to being raised?

Ryan R.

Real Estate Investor · Central, TX · Member since 2012 · 479 posts · 165 votes

11y

Can you tell us more about the foundation requirements and changes needed to accomplish this? What type of foundation is this? What was the most important component to making this possible ( footer depth, width )? What tests did the engineer perform?

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

@Karen Margrave AWESOME idea with the JV "Joint Venture" angle! We have tried this several times, with several different sellers, in several different ways, but we have yet to "CONNECT" on a deal.

I always attribute the failure to the sellers lack of ability to see my GRAND VISION of how we would both end up BAJILLIONAIRES after the deal is complete, but any advice you could lend to close these kind of deals other than I need a padded room and some Tony Robbins tapes would be much appreciated!

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

Originally posted by @Joshua D.:

@Karen Margrave - Once we get more of these I'll be more than happy to create a new forum.... ping me and we can discuss. Thanks!

How many do we need??? With @J Scott 's MAD Authoring skills, and my ability to "READY....FIRE...AIM" you should be able to start an ENTIRE subdomain of DONTDOTHATAGAIN.biggerpockets.com!

OP

Residential Real Estate Agent · Atlanta, GA · Member since 2010 · 325 posts · 335 votes

11y

Originally posted by @Colleen F.:

A sort of build diaries forum. I like the idea, I think it takes dedication to the writing though and I admire those people who find the time to share the project while they are doing it. And also share when they make mis-judgements along the way.

If work takes me to Atlanta I would have to try to go see it too because this one sounds interesting. Had this been an idea you were thinking of and looking for the right house or did you just see the house and find it was suited to being raised?

BOTH, We had been wanting to learn more about and execute / add a second story addition project to our experience / repertoire. We initially targeted this project as a Tear down / Rebuild, but given the amount of new construction currently in our pipeline and a good "feeling" about this going reHAB vs. reBUILD we chose to POP tha TOP!