We took on a major rehab project. Please help!

Real Estate Deal Analysis & Advice
10yFollow

We took on a major rehab project. Please help!

Annie L.
Doylestown, PA · Member since 2016 · 15 posts · 2 votes

Hello! Long story short, we were trying to wholesale a property but ended up closing on it instead. It's our first project and we want to do the BRRR method. Problem is, the extent of the renovation is HUGE. It's a 1870 house and has structural issues in the foundation and retaining walls around the house. There's mold because water has been getting through a hole in the roof. There may or may not be termites and there seems to be poison ivy draping over a retaining wall on the side of the property. And there's stuff everywhere from the prior residents who abandoned it 5 years ago. People always say that as newbies, you shouldn't take on anything extensive but alas here we are. I would really appreciate any guidelines people have about the order of steps needed to rehab something like this. I have J Scott's Flipping book and Estimating Rehab Costs book but there doesn't seem to be a guideline on order of events. There has already been a home inspection and yesterday we had a structural engineer come out to assess the structural issues. He basically told us that we should get it cleaned out and gutted first then bring him back because he can't see everything with all the obstacles especially in the basement. He also advised that we get one side of the roof redone as early as possible since we don't want any more water getting in. We also brought a contractor to give us an estimate but again I guess you can't really tell what needs to be done until all the stuff is out and we gut the place down a bit. J Scott basically says get a Scope of Work figured but that is only if you know exactly what needs to be done. At this point, we can't see everything and there seems to be other issues that need to be addressed sooner right? Any thoughts on how we should approach this?

Here is the link to more pictures:

https://www.dropbox.com/sh/xujxwl05ad2quw2/AAC4b4D...

purchase price: $35K

ARV: $170-$190K based on ur own estimates and confirmed by other investors.

We're hoping the large spread provides enough cushion room for us.

1Reply
80 views

Most Popular Reply

Charles Biter
Rehabber · Clarksville, TN · Member since 2015 · 74 posts · 44 votes
10y

I am going to offer a different strategy since this is your first rehab.  Have you though about a prehab?  I would clean out the house put a new roof on it and then wholesale it. 

4Reply
See this reply in the discussion

26 Replies

Jump to latestLatest
  • Account Closed
    Western Suburbs, IL · Member since 2016 · 58 posts · 16 votes
    10y
    Looks like a full gut job. Gut everything out first and put a new roof on it, like asap. That will at least secure the property from further water damage and mold. Then deal with the structural issues.
    0Reply
  • Sachin Kholamkar
    Sugar Land, TX · Member since 2016 · 12 posts · 3 votes
    10y

    I had one of such deals that went away. To me these are typically "tear down" "land value" deals. You can confirm this by going to county website and checking for land value. If its closer to what you paid, thats what other people thought about the property.

    Flipping will be a risky affair, especially as a first one.

    If the property is not in a very upscaled location, you can demolish existing home and build a 3Bed2Bath starter home. I don't know the new built rates there, but here in Houston I can get one for about $100-105/sq.ft. with basic package. Plus they charge about 10k for the tear down and clear the site. (permits are etc.!)

    See if those nos. makes sense. Call up 4-5 investor friendly builders and you will have the idea.

    I can see you guys must be super excited + super concerned at the same time...:)

    All the best!

    Sachin K.

    1Reply
  • Account Closed
    Ira Township, MI · Member since 2015 · 57 posts · 17 votes
    10y

    If I was in your position I would gut the place to the studs. Depending on your future plans with it your going to have to meet residency requirements set by the municipality its situated. Jeez, that is a lot of work and unless your super handy, it is going to be a money pit I think. I would suggest clearing everything out and getting to the root of the problem; at the very least you can then have the contractor walk through to get a rough estimate. What would the property be valued without the structure? Is that an option? 

    0Reply
  • Amy L.
    Investor · Leesburg, AL · Member since 2014 · 46 posts · 15 votes
    10y

    Try to stay positive, I know it feels overwhelming right now, but you can do this. Get rid of everything, maybe you could get some folks to help dump everything into the dumpster you rent from the trash people. Then get estimates from GCs and get the roof fixed asap. Water always finds a way out! Do as much of the work yourself, if you have the skills, saves you a little $$. Don't forget to use gloves and masks as needed, it's a daunting task. I've seen worse places! REI is not for the faint of heart!

    Best of luck!

    1Reply
  • Rick H.
    Lender · Greater LA/Orange County area, CA · Member since 2012 · 3k+ posts · 3k+ votes
    10y

    Got lost in the narrative. 

    (5) words or less: what do you need?

    1Reply
  • Charlie John
    Investor · Twin Cities, MN · Member since 2015 · 130 posts · 111 votes
    10y

    @Annie L.

    You need to get to work right away. Get a 40 yard dumpster (you will need a bunch of these!) and get some guys in there for $15/hr to just clean the place out!! Supply these guys with respirators, gloves and tools. 

    Then once cleared out you should demo Sheetrock, cabinets, fixtures, carpets, etc. 

    Keep things like original doors, staircase posts and spindles, window/door casings, etc. 

    You can't get a realistic plan going until you know what you are working with. 

    This will cost you about 10-15k. 

    You should be fine. Stay positive and go at this one with full force. Don't get overwhelmed. One day at a time but continue to make big progress. This will be a fantastic opportunity to learn everything about a house. Congrats! :-)

    4Reply
  • Lesley Govan
    Investor · Stratford, CT · Member since 2015 · 110 posts · 16 votes
    10y

    Looks like a lot but you can do this! Good Luck!!

    0Reply
  • Mario Brown
    Investor · Greenville, SC · Member since 2016 · 163 posts · 108 votes
    10y

    Depending on how the numbers shake out with land value, definitely look at this as an opportunity to learn a "**** ton." As your first deal is typically a lesson of some sort or another, you will just be getting a masters degree instead of an associates degree. I am working on a home that was in a similar situation if you want to follow along on the House Development Steam. Here are our steps so far we are only 3 weeks into the job. 

    1. Get all of the furniture trash and tenant leftovers out of the house
    2. Demo
      1. Strip Floor System Out
      2. Rip out Ceiling in Areas with Water Damage
    3. Assess the situation and get your structural engineer to give you his opinion/report. 

    If you are planning on holding on to this house, make sure you are thinking 15- 20 years down the road, you do not want to cut any corners with any structural pieces. (i.e. spend an extra 3k on structural items and put laminate counter tops in instead of granite in toward the end of the project)

    0Reply
  • Gavin Peacock
    Flipper/Rehabber · Brentwood, NH · Member since 2014 · 32 posts · 23 votes
    10y

    You're lucky. In Portland, that would've cost you $400,000! Good luck with the renovation!

    0Reply
  • Account Closed
    Princeton, NJ · Member since 2016 · 44 posts · 22 votes
    10y

    I'm going to skip thinking about costs, or what you might learn, or deals or whatever. 

    Scope of work:

    -Remove all furniture, trash, things that are not tied down. 

    -Secure the roof (ie. stop leaks) put up a tarp, get a piece of osb and a nailgun and nail it to where the leaks are (if localized), make sure it stops leaking. Don't replace the roof, because things may shift around if you start touching the foundation. 

    -Determine location of mold/termites, have professionals take care of this (before or after demo of remainder)

    -Demo sheetrock, studs, etc

    -Resolve foundation issues with professional help. 

    -Rebuild your house. 

    Looks like a heluva job, but construction/design/rei is fun! Good luck!

    1Reply
  • Charles Biter
    Rehabber · Clarksville, TN · Member since 2015 · 74 posts · 44 votes
    10y

    I am going to offer a different strategy since this is your first rehab.  Have you though about a prehab?  I would clean out the house put a new roof on it and then wholesale it. 

    4Reply
  • Andre M.
    Portland, OR · Member since 2016 · 25 posts · 6 votes
    10y

    I am very curious to see where this goes. 

    0Reply
  • Greg JeanfreauPro Member
    Real Estate Agent · New Orleans, LA · Member since 2015 · 145 posts · 127 votes
    10y

    Sounds like a typical New Orleans reno project. Is it in a National Historic District? If so and you plan on holding to the property for a couple of years, you should look into Federal tax credits.

    0Reply
  • Johnny Kang
    Investor · New York, NY · Member since 2014 · 279 posts · 224 votes
    10y

    @Annie L.

    I have some friends in Doylestown, and my business partner decided to move to PA and we met a realtor who's husband flips properties in Bucks and Montgomery county. I've seen his work and they also have 10 rental properties, so they're a good contact to have. If you're interested in talking to him, PM me. 

    0Reply
  • George P.
    Property Manager · Livonia, MI · Member since 2011 · 4k+ posts · 1k+ votes
    10y

    This is a normal rehab for me.  I get excited at This stage... Get dumpsters And roll up your sleeves.  

    0Reply
  • David C.Pro Member
    Realtor · Oceanside, CA · Member since 2016 · 12 posts · 0 votes
    10y

    I feel your pain as well.  I'm sitting on a 4 bedroom property a half mile from the beach in Jersey, in a historic district, with restrictions on how and what can be built/renovated.  I've painstakingly been guided as well by J Scott's theories.  His matrixes for his scope of work, his book, and "Renovation 4th Edition" have made the process a little more understandable for me, as I'm not a contractor. (Heck, I have to go to Home Depot several times for a simple repair on my rental) Like you, I Haven't started as I'm on the west coast for now, but each trip I make consists of a contractor visit and architect whom I show my envisioned design.  Everyone who has commented above has echoed the suggestions I receive from contractors, and it would appear that there is no short cut, but to just plan properly with an inspector, a good architect and builder, and a nice zoning officer or HPC (Historic Preservation Commitee).  I scour this site regularly to find the secret to how I'm going to get this done, and it continues to fall back on planning, research, an understanding from designers and contractors, and what they'll allow in the area.  oh,... and time!!!!!!! 

    But I'm interested in how you progress, I hope to learn more from your posts.

    Good luck!

    0Reply
  • Paul Winka
    Rental Property Investor · St Louis, MO · Member since 2010 · 317 posts · 72 votes
    10y

    @Annie L.

    Considering your experience level (almost none) and that you bit off more than you could chew, my first instinct says to demolish that place and put in new construction if local laws allow for it. Sit back and learn something from the process and keep your sanity for this first go. 

    I would expect fewer nasty surprises from doing new construction. If you go the gut-and-rehab route you might get dinged for change orders for things found as the project progresses and you'll feel like you're in that '80s movie, Money Pit. 

    Another reason for the new construction, and this is just my humble opinion: I am looking at the dropbox photos and TBH, even when putting on my rose-colored glasses and envisioning the finished rehab job, I don't find the house appealing. 

    0Reply
  • Alec Sithong
    Charlotte, NC · Member since 2016 · 56 posts · 8 votes
    10y

    Sounds like a daunting deal for a newbie - especially if you don't have construction or architectural background. You've done the right thing in bringing in a structural engineer and contractor to look at. I did not read or see that you've brought in an architect - sorry if I've missed it. It would be a good idea to have an architect review the mold condition and see to what extent the damage is and where the moisture penetration is coming from. Hiring an architect, structural engineer, and contractor can run up your tab quickly. If you can find them to do an initial consultation for free that would be a bonus - or find friends who knows one. Get their recommendations, do the math and see where the numbers are in relation to ARV. This might be out of your budget (or anyone's budget) and you may have to prehab (like one person said earlier) and get out earlier and not lose money. Numbers are key here to be on top of this deal. Get quotes on mold mitigation (removal and cleanup), rehab numbers and then see if you can stay on top of profit margin. Good luck and wish you the best!

    0Reply
  • Sean Cole
    Investor · Cincinnati, OH · Member since 2012 · 506 posts · 331 votes
    10y

    How do you eat an elephant?  1 bite at a time.

    Take a breath and don't get wrapped up in the scope of everything that needs to be done right now.  It's clear that the first thing to happen is to clear out the contents and repair the roof.  At some point, you'll want to make a list of everything that needs to be done, but when you're feeling overwhelmed it's not the time to do that.

    BTW, where are all the "wholesalers are crooks" guys congratulating her for closing on a deal she couldn't wholesale?!

    1Reply
  • Ian WalshBusiness Member
    Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
    10y

    I would really spend the time to make sure you have the right contractors.  See if you can get references.  Make sure you structure their payments very carefully and don't lay out too much money for each phase until it completes.  Don't stress out about the project.  If you have the right contractors and the money disbursement plan correct, then you will be fine.  

    0Reply
  • Account Closed
    Western Suburbs, IL · Member since 2016 · 58 posts · 16 votes
    10y
    Ok, I just looked through your full album. I think the front of the house could be very appealing, it will improve as soon as you rip down those awful aluminum awnings and cut out all the overgrown shrubs/trees. The back of the house though looks like some half *** addition that totally doesn't match the rest of the house, that roof line is horrible. I would definitely work with an architect and try to match that to the rest of the house as well as using the same exterior material for the whole house (whether you choose stucco, siding, etc...). Looks like the foundation for be rest of the house is ok, just that addition is sinking. At worst, you might have to tear that addition down and rebuild it.
    0Reply
  • David Hood
    Houston, TX · Member since 2014 · 29 posts · 7 votes
    10y

    Prepare yourself that you might not make any money on this project. 

    It will take every bit of 130k for a house that large (and many many months depending on how much work you contract out)

    I'd suggest you get a dumpster and clean up the property so it doesn't look so daunting then try to sell it to someone with experience. You are going to need a lot of things to go exactly right to make that project a success.

    A smaller house would be a better first project.

    1Reply
  • Alec Sithong
    Charlotte, NC · Member since 2016 · 56 posts · 8 votes
    10y

    I would agree with David Hood. After the clean up get some numbers in and see where that will take you. See how you can stay on the positive side with prehab and sell or sell as is after gutted and cleaned up. It will be a good learning experience. Keep your head up and update BP'ers as you'll get some helpful advice along the way.

    0Reply
  • Say Teoh
    Residential Real Estate Broker · Portland, OR · Member since 2016 · 92 posts · 31 votes
    10y

    Hi @Annie L., since you already jumped in and closed on it... instead of saying you should not do this... I say congrats on taking the first step! :) There is always opportunity, you just have to take a deep breath and see it. Few members here already pointed a few exit strategies for you, such as clean up and try to wholesale it again...should not be hard, just rent a dumpster, hire someone or do it yourself, thrash everything, put a tarp on the roof for temporarily stop the leak. For the full remodeling route, I would find an experienced GC, even J. Scott started his first few projects with a GC, and learn the process. Tell the GC what you want the end result to be (be as details as possible), and he should be able to plan out the work and schedule everything.

    Hope this helps!

    Say

    0Reply
  • Isaac Antoine
    New Orleans, LA · Member since 2015 · 49 posts · 11 votes
    10y
    Please contact me
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free