Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
Hello BP!
I'm going to use this thread to detail a project house that I just purchased. I have learned so much from the community here hopefully sharing this might help someone else.
We closed around three weeks ago and I will update the thread accordingly.
History: I got a call from a 'tired landlord' who sold me some houses last year with an agent. They had a fire in a rental. I inspected the house. It had minimal structural damage and the rest of the bones looked good.
We went under contract that day and closed a week later. I am not sure if I will flip it or rent it. My thoughts are to rehab with the idea of selling in 10 years.
Purchase 12,000
Rehab/Holding Estimate 35,000. ARV 85,000 Rent 1200 (keep in mind taxes are over $300/month)
I estimate it will be rented in February.
The house is very chopped up with 4 small bedrooms and a bunch of illegal rooms/bath down in the basement. It's around 1000 sq ft downstairs plus the 2 upstairs dormer bedrooms. I need to check with the city to see what is legal.
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
Thanks @Frank Dortilus , the basement was a mess. I wish I took pictures, it was sectioned off into separate bedrooms for living and sleeping space. Damp, smelly disgusting.
@Darren Sager I found a frying pan completely melted on the burner. (could you move this thread to the investor deal diaries forum?)
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
My first lesson was:
"Check with the city for requirements immediately after signing the contract".
This city requires a CO for any ownership transfer AND a plumber to sign off on the heater and hot water. I didn't find this out until one day before closing. After spending the afternoon running around with limited success, we still closed the next day with the threat of fines for me to deal with later.
I submitted paperwork to the city on the day of closing and they scheduled the CO inspection a week later. An inspector came out and said we could now move forward to apply for permits. The inspector also said the daily fines are only used in situations when the owner is not actively working on the requirements.
At the end of week one, I could now submit permits.
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
@Steve Richardson We spent the first couple weeks emptying 10+ tons of construction debris and smoke/water damaged property. Below is a pic of the kitchen after the first day of cleanout.
The 90 year old hardwood looks to like it can be saved. I will tile the kitchen and bath. With the kitchen, solid wood cabinets but I haven't choose a style. I like the value that spending an extra $1000 on granite brings but I'll see how the layout shapes up.
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
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Thanks @Karen Margrave & @Jon Klaus I appreciate all the info you both have shared and what you bring to the community.
The taxes are insane. I just double checked, valuation is at $110,000; taxes $3,847. Our market is very negative right now. We currently have the 2nd highest foreclosure rate in the nation and uncertainty with changes in the casino market. I should be able to get the valuation down at least 20% but have to wait until the new year.
Investor · Atlanta, GA · Member since 2014 · 54 posts · 17 votes
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Hi @Kurt Kwart how is the rehab going? Any new pictures to share? I'm getting excited imagining myself in your shoes. Also a bit scared too. Hire any contractors to do some work? All yourself?
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
@Matthew Trotter It is coming along but never as fast as I would like. I am able to manage the project with my wife, a good worker (from contractor friend) and subs but $320 a month in taxes hurts.
After closing there was two weeks of demo and then a planned quick turnover for another place. This put us back another week and a half until we got back on this house. In that time I also found that the upstairs bath is illegal and needs to come out and the house is only a legal 3/1. There is not enough headroom upstairs for a legal bath but I can have a living space and bedroom upstairs. I also had been struggling with getting a reasonable electrician. I signed off as 'owner occupant' and have a friend who can help me do it. This will create some complications if I don't bring on an licensed electrician but the savings are about $5000. For now it was what I needed to do get all the permits approved.
At week 4 and 5 we finished demo at and have been waiting permits.
Here's a pic up the upstairs bath that has to come out
South Lake Tahoe, CA · Member since 2014 · 111 posts · 37 votes
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@Kurt Kwartdumb question, in California if something doesn't have permits as long as it is disclosed when you sell, it can usually stay. Why do you have to remove it?
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
The old cedar siding can be salvaged. Some spots need replace/repair and the whole exterior will need paint. Cedar is very expensive so I started looking into options.
I found a few threads here about how great cement board is. I am very happy with the results.
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
We are now insulating and should drywall Monday.
The biggest issue has been managing electrical... When I first got the place I didn't ask the electrician for a formal quote. He then gave me all the paperwork for the permits and I saw the $9000 price. At this point all other permits had been approved and we needed the electric permit before we could move forward. At this point I looked for another option. First call is to a recommendation from the HVAC guy, I call this guy and he says he can't do work in the town because of issues with the inspector. Now, I'm starting to get concerned... I end up pulling the permit under the primary occupancy rule and get it in my name. I made this move because everything was being held up for this last permit.
Long story short... it took 5 weeks of delays from electrical inspector finding "issues." He found things that I could have appealed and admitted I might win. Nothing he asked was clear in the code, lots of grey area stuff that normally would not be a problem. My friend in a union electrician and knows the code... he couldn't believe what this guy was asking for.
We decided to fix what he wanted as it would still be quicker and cheaper than a court appeal. We did just get approval but probably because the original inspector was on vacation and we had fill-in inspector who was very reasonable.
He made us put a "disconnect" outside because
"if someone finished this wall with drywall and put a screw in the cable, the whole house will burn down before it blows the transformer on the pole"
Buy and Hold Investor · Nashville, TN · Member since 2013 · 264 posts · 102 votes
11y
Well, transformers are fused, so technically a transformer rarely 'blows'. Not sure what exactly you're showing in that picture, but it's very likely that an outside disconnect is required by code anyway.
Specialist · Atlantic City, NJ · Member since 2013 · 431 posts · 170 votes
11y
The code here does not specifically say when a disconnect is required @JT Spangler and while consensus was > 6', the inspector is the authority.
In the pic I'm trying to show
It's in an unfinished area that does not require protection
It's on a wall that could be very hard to drywall and hide the feed cable
The feed cable is under 3'
I hope it doesn't come across that I am blaming this guy on the delays. It is a great experience and the trade off in savings should be worth it. The holidays don't help but saving time to get done earlier this time of year is not a priority.
Buy and Hold Investor · Nashville, TN · Member since 2013 · 264 posts · 102 votes
11y
I'm an electrical engineer by training; the code always says when a disconnect is required. Sometimes interpretation varies, and I've definitely seen a lot of cases when the inspector wanted something above and beyond the code, which is part of their job, even though it's really frustrating when you're the person doing the work or paying for it.
Anyway, I didn't think you were blaming the inspector -- I was just chiming in to comment on the picture. And one of my consulting jobs is training electricians, so I can tell you for sure that there are many that think they know the code a lot better than they actually do.